Oral Answers to Questions

WORK AND PENSIONS

The Secretary of State was asked—

Unemployment (Nottingham, North)

Graham Allen: If he will make a statement on the consequences for his Department of recent trends in unemployment in Nottingham, North.

Jane Kennedy: The UK has one of the best labour markets in the world. We now have just over 28 million people in employment, which is more than ever before. We also have the best combination of employment and unemployment figures of the major industrialised countries and, as a result, my hon. Friend's constituency has experienced a 44 per cent. fall in unemployment since 1997.

Graham Allen: I thank my right hon. Friend for those statistics, and urge her to keep unemployment on the agenda. The Government's success in tackling unemployment is in danger of knocking it off the agenda, when we should be celebrating that success. Does she accept, however, that there is a law of diminishing returns: the more we conquer unemployment, the harder it is to get those who remain unemployed back into work? Will she therefore look at the action teams for jobs and at the possibility of devolving authority from employment centres right down to our estates by deploying individuals to those estates who know the people and who can tailor the service to get the people who find it hardest to get jobs back into employment?

Jane Kennedy: I am grateful to my hon. Friend for that comment, and for the close interest that he takes in this subject. Despite the success of our labour market policies, we are not complacent and we know that there is more to be done to help those groups of people—and the areas that he has rightly identified—who need extra support. He rightly draws attention to the work of the action team for jobs in Nottingham, which, with the employment zone, has helped more than 1,700 people into work.

Economic Inactivity

Dave Watts: What recent progress has been made in tackling economic inactivity.

Jim Knight: What progress has been made in tackling economic inactivity in the last six years.

Andrew Smith: Thanks to sound economic management and the new deal, Britain has record employment and the lowest unemployment for nearly 30 years. The number of economically inactive people claiming benefits has fallen over the past seven years, with, for example, nearly 200,000 fewer lone parents on income support. While we have achieved a great deal, there is still more to do. We are tackling economic inactivity by requiring everyone applying for benefits to have an interview about work, and by providing effective help so that more lone parents and people on incapacity benefits move off welfare and into jobs.

Dave Watts: I thank my right hon. Friend for that response. St. Helens has set up a local partnership, but it has found five major problems: a lack of long-term funding; a lack of joined-up government; a lack of training; discrimination by employers; and a low earnings threshold. Will he assure me that all those issues will be addressed in his review?

Andrew Smith: Yes, indeed, and I commend my hon. Friend for the support that he gives to the active partnership in his constituency, which plays such an important part in tackling these challenges successfully. With regard to joined-up government, we are doing pioneering work with the Department of Health on the pathways to work initiative, to bring together at local level primary care providers, rehabilitation services and the Jobcentre Plus effort. This is a clear pointer to the way forward. We are tackling discrimination through the extension of the Disability Discrimination Act 1995 and through the draft Bill that is currently before Parliament, both of which will provide huge moves forward on that agenda.

Jim Knight: Does my right hon. Friend agree that one of the best ways to tackle the problem of economic inactivity is to deal with health-related problems before a pattern of inactivity traps an individual? What is his Department doing to realise the potential role of rehabilitative and occupational therapies in tackling this problem?

Andrew Smith: As I have just been saying, the link with primary care, rehabilitation and condition management services is absolutely crucial. We are running pilots on the role of better occupational health, and on tackling ailments such as back pain and stress. As my hon. Friend says, if we can work with employers to tackle these problems before people leave work in the first place, we will face less of a problem with people moving on to incapacity benefit long-term. Mounting evidence, including an important report published last month by Professors Gordon Waddell and Kim Burton, points to the clear medical benefits of therapeutic and rehabilitation activity in the workplace, and shows how, in most cases, people's medical condition is helped by getting them back to work as soon as is sensible.

Archy Kirkwood: The Secretary of State will understand that this is one of the most important areas for Government action in the coming months and years, and there is mounting evidence to show that the stock of people on long-term disability benefits is not diminishing at all. How soon will it be before we can evaluate the pathways to work pilots? It would be interesting to know. I am particularly concerned about the case-loading that some personal advisers to jobseekers and disability employment advisers have to cope with. The case load is so great that they cannot give the individual attention that those clients need.

Andrew Smith: Further evidence on the performance of the pathways to work pilot and early indications of the difference it is making will be published over the summer. The information that I have received anecdotally is very encouraging. The first step in full evaluation will not be published until next spring, and we all look forward to that.
	On case-loading, I agree about the importance of the work that personal advisers have to undertake. Of course, with the roll-out of Jobcentre Plus and work-focused interviews, everyone who applies for the so-called economically inactive benefits, as well as active benefits, must have those interviews. We are developing further the programme of support that is available to follow up the interviews, as well as the help that is available through the existing new deals and, I might emphasise, the new deal for disabled people, the performance of which is improving month by month.

Graham Brady: The Secretary of State referred to 200,000 lone parents no longer on income support, but a written answer that I received last week from his Department made it clear that 106,570 lone parents have been through the new deal at least twice. Does he accept, therefore, that a large number of people are coming off benefits not because they are moving towards work but because they are trapped in a revolving door that takes them back to the new deal for lone parents, back to benefits and back to the new deal again?

Andrew Smith: I find it difficult to accept that those people would be better off if there were no new deal programme to help them, which, of course, is the policy of the Conservative party. I accept—I am sure everybody would; it is common sense—that we must continue to work to improve those programmes so that a still-higher proportion of those who go through them stay in jobs. As I reported in a previous, similar exchange, the record for lone parents staying in work who have been through the new deal is considerably stronger than that for those who have moved into work without going through the new deal—so it is definitely adding value in terms of people moving into jobs and staying in them. We need to build on the new deal, not scrap it.

Dari Taylor: I seek reassurance from my right hon. Friend. Recently, I visited Jobcentre Plus, which, with a private trainer called NETA—the north-east training association—is delivering effective, excellent skill training. It is doing so, however, in response to an employer's demand, so employment is absolutely assured. The work force are in their late 30s or early 40s, and none of them thought that they would get skilled training ever again. Will he reassure me that the Ambition programme will be financed in future? It is excellent, and my people thoroughly approve of it.

Andrew Smith: My hon. Friend, rightly, is enthusiastic about what the Ambition programme is achieving, both in Ambition: Energy and across a number of other sectors. As she says, a distinctive strength of the programme is that it involves not simply programme-push on people being put into the labour market, but employer-pull in ensuring that they have the skills that employers require.
	In relation to the Ambition programmes and, more generally, to ensuring that we have better joint working with the Learning and Skills Council and business links, we must ensure that our employment programmes are ever more effectively targeted on ensuring that people have not only the basic skills and employability but the specific vocational skills that employers require to fill their many vacancies.

Michael Weir: Economic inactivity is a serious problem in many areas, but the Secretary of State will also be aware that a report last week disclosed that Glasgow is the poorest city in the UK, with 41 per cent. of households in poverty. What good will the measures that he talks about do unless he acts to tackle the low-wage economy that keeps people in poverty, even if they are able to get work?

Andrew Smith: Glasgow is also an employment zone, and as such has seen good achievements in helping the long-term unemployed back into work. Much pioneering work has been done through community-based initiatives in Glasgow to help the economically inactive into jobs. As far as low wages are concerned, this Government have introduced not only a national minimum wage but tax credits that make sure that work pays. As my hon. Friend the Member for Stockton, South (Ms Taylor) said a moment or two ago, the better we equip people with skills, the more we can help them to progress in a job and towards a career: it is not simply welfare to work but welfare to a career. That is the direction in which our policies are moving, and I trust that the hon. Gentleman will support us.

David Willetts: Will the Secretary of State confirm that, on the latest figures, 1,023,000 people aged between 16 and 24 are not working, not studying and not training? Will he confirm that, despite all the initiatives, programmes and schemes that he has mentioned, the number is virtually unchanged compared with the number in 1997? Why is it unchanged?

Andrew Smith: Thanks to the new deal—[Interruption.] Conservative Members do not like to hear it because it is so important and because it is true. The employment rate is crucial, and the employment rate of the group to which the hon. Gentleman refers is up. As the report of the independent National Institute for Economic and Social Affairs showed, the unemployment rate would be twice as high were it not for the new deal. In making claims about the figure mentioned, the hon. Gentleman ignores the increase in the numbers of students and in the number of people on shorter training courses, who may be classed as inactive but who are moving closer to work, gaining precisely the skills that my hon. Friend the Member for Stockton, South (Ms Taylor) mentioned a moment ago. In proposing to abolish the new deal, the hon. Gentleman would not only deny those young people the help that they need but go back to the bad old days of the stay-in-bed culture, which inflicted so much damage the last time the Tories were responsible for employment policy.

Benefit Fraud

Peter Luff: What his most recent assessment is of the level of benefit fraud.

Chris Pond: We are winning the war against benefit fraud. Since 1997, we have reduced fraud in the two main working age benefits by 38 per cent., which is equivalent to £280 million. We are now in the middle of our latest "Targeting Fraud" advertising campaign, and we have just launched a new series of hard-hitting radio adverts. I am confident that that will help us to meet our challenging target of a reduction in fraud and error of 50 per cent. by 2006.

Peter Luff: I am glad that the Government think that they are winning their war on benefit fraud—we all want them to do so—but at what cost is that war being won? May I read to the Secretary of State the comments of my constituent, Max Harper, about whom I wrote to the Minister for disabled people on 16 June? He says:
	"I live in fear now that if I lift a camera I will be reported to the DWP and will lose benefit or worse."
	He is a severely depressive individual whose only pleasure is photography. The combination of the abolition of the therapeutic work rule and the introduction of the permitted work rule and notional earnings rule has destroyed his life. Will the Government reconsider the way in which the rules work, and make sure that they work in favour of the mentally ill, whom the Government say they want to get back into work?

Chris Pond: We are reviewing those rules. The hon. Gentleman will know that we do not seek to target individuals in those circumstances through our anti-fraud campaigns and new investigative measures. I am sure that he would agree, as do nine out of 10 of the British public, that tackling benefit fraud—I am talking about fraud—is extremely important. That is why so many of them are joining us in fighting fraud, and using the fraud hotline—0845 854440. I am sure that if the hon. Gentleman has any information about true fraudsters, he will give us a call.

Ann Cryer: Does my hon. Friend agree that a universal ID card could assist in the battle against benefit fraud? It might also help those with proper and legitimate claims to access services and benefits.

Chris Pond: Yes, the Department supports the identity card proposals. We believe that it would help not only to root out identity fraud, for which we already have successful measures in place, but to make sure that in the longer term people who are entitled to benefits receive them. It might also improve take-up.

Disabled People

Vera Baird: What progress has been made in enabling disabled people to play a full and active role in society.

Maria Eagle: Good progress is being made. By the end of this Parliament, the Government will have achieved the biggest improvement in civil rights for disabled people in the history of this country. We established the Disability Rights Commission to act as the official champion of disabled people. From 1   October, we will extend employment rights to 7   million additional jobs, in which 600,000 disabled people already work. The draft Disability Discrimination Bill will further improve the position.
	More disabled people are now in work than ever before. In 1998, 43 per cent. of disabled people had a job: in 2003, the figure was 49 per cent.

Vera Baird: Outside the world of work, what impact does my hon. Friend imagine those changes, and the establishment of a commission for equality and human rights, are likely to have on the social lives of people such as my constituent, Jamie Hood, a tetraplegic young man who has had some difficulty in gaining access to a wide enough range of social facilities to suit his young age of 32? From time to time, he has become depressed because of that. I am sure my hon. Friend agrees that it is essential for disabled people to have lives as full as all the rest of us, in every way.

Maria Eagle: I strongly agree with my hon. and learned Friend, who works very hard on this issue, particularly in her new role as chairman of the all-party group on equalities.
	I believe that the new commission for equality and human rights will lead the fight to turn rights into a reality for people such as my hon. and learned Friend's constituent. Provisions in the Disability Discrimination Act 1995 and the new Bill will guarantee access to goods and services, so that people such as my hon. and learned Friend's constituent have the chance not just to go to work but to access life in full, which is what we want them to be able to do.

Julian Brazier: I have several disabled friends, including two former members of the Army who are wheelchair-borne, and I strongly endorse work on behalf of the disabled. Is it not a fact, however, that disability benefits have become a dumping ground for people who would otherwise be unemployed? Does the Minister accept claims by charities such as the Shaw Trust, which does excellent work placing disabled people, that approximately a third of those currently claiming disability benefits could be in the work force if they were given proper encouragement?

Maria Eagle: I believe that many people on incapacity benefit who in the past have been written off and deemed incapable of work can work, with the right support and help. That is why we are developing our pathways to work programme, which will help them in that way. It is also why we can say that 6 per cent. more disabled people are now in work—the greatest number ever. The Conservatives put 1.9 million extra people on to sickness and incapacity benefit; we have created 1.9 million extra jobs, and I think that the hon. Gentleman should welcome that.

Anne Begg: One way in which disabled people can get involved in society is by getting involved in voluntary work. A few years ago, Aberdeen Action on Disability was given a lottery grant to encourage voluntary work among disabled people. Will the Government consider piloting a similar arrangement to encourage disabled people to enter the volunteer work force, which might eventually lead them into full-time work?

Maria Eagle: My hon. Friend is right: volunteering can make an important difference to individuals who are trying to become more active in all kinds of ways. The Joint Committee considering the draft Disability Discrimination Bill has made recommendations in that regard, and we will respond to them within the time scale that the Committee has set.

Paul Goodman: The Minister has now mentioned the draft Disability Discrimination Bill three times, I think. As she will know, disabled people are seriously concerned about its future. Many of them believe that if it is not introduced in the current Session, it will not reach the statute book. The Joint Committee's report, signed by six of the Minister's colleagues, states:
	"We believe that the full Bill should be introduced this Session."
	Will the Minister guarantee today that it will be?

Maria Eagle: We will respond to the Committee's report within the time scale set by the Committee. We will also ensure that we fulfil our manifesto commitment to see the Bill on to the statute book during the current Parliament. The hon. Gentleman should not make the mistake of assuming that we are like his party, which spent 16 years trying to stop disability civil rights. We will fulfil our commitment, and we will do so during this Parliament.

Pensions

John Robertson: What plans he has to protect the pension rights of workers transferred from one employer to another.

Malcolm Wicks: Measures in the Pensions Bill will protect the pension rights of employees where there is a TUPE transfer. No longer will employees who have access to an occupational pension scheme with employer contributions risk losing their benefit when a transfer occurs. Our Bill will ensure a decent level of pension provision by their new employer.

John Robertson: I thank my hon. Friend for his answer. During consideration of the Pensions Bill, he expressed concern that obliging transferee employers to provide pension schemes broadly comparable to existing ones could encourage such employers to pull out of pension provision altogether. On the basis of what advice and evidence does he make that assessment, and does he believe that it constitutes the right balance between giving flexibility to business and providing genuine and worthwhile protection to employees on the transfer of an undertaking?

Malcolm Wicks: We wanted to get the balance right because often it is in the interests of a company and its work force that the work force be transferred to another company. We require the new employer to provide transferred employees with a defined benefit occupational pension, or a defined contribution pension with a matched employee-employer contribution of up to 6 per cent., or a stakeholder pension with a matched contribution of up to 6 per cent. That provides a decent minimum standard for such employees.

Bill Tynan: My hon. Friend will recognise that sometimes employees transfer to inferior schemes. Will he support re-examining compulsion—whereby the employer has to put in 10 per cent. and the employee 5 per cent., for example—to ensure that we create an occupational pension scheme that is fair to all in the event of a transfer?

Malcolm Wicks: We will look at the more general question of a voluntary-versus-compulsory approach when we receive the advice of Adair Turner's Pensions Commission. The Government are committed to a voluntary approach, which has many advantages. However, it is right and proper that the Government—a Labour Government—have for the first time legislated to give private-to-private transferred employees a decent minimum pension standard. As my hon. Friends the Members for Glasgow, Anniesland (John Robertson) and for Hamilton, South (Mr. Tynan) know, in the light of the good service that they have provided on the Pensions Bill Standing Committee, that is what we intend to do.

Kevin Brennan: Last week, my hon. Friend published some details on those who have lost their pensions rights through insolvency and who may be entitled to make use of the financial assistance scheme. He said that the scheme's generosity will be affected by a number of factors, including whether there is funding from industry. What progress has been made in persuading industry to contribute to the scheme?

Malcolm Wicks: As the House knows, we have decided that £400 million of public money should be provided for the assistance scheme. That was the right thing for the Government to do because, apart from the justice of the case, we have an interest in restoring confidence in pensions, as does the pensions industry. We have written to a number of organisations and we will soon have meetings. I very much hope that the industry will make its contribution to the assistance scheme.

Departmental Scheme Appraisal

Sandra Gidley: If he will make a statement on how the new appraisal scheme is intended to help motivate staff, improve efficiency and improve performance in the Department.

Andrew Smith: The new scheme has a number of features to motivate staff, including clear work objectives, regular feedback on performance and a strong focus on personal development. It will help to improve efficiency and performance by more rigorously identifying and rewarding different levels of contribution by staff, which has been shown to work successfully in the public and private sectors.

Sandra Gidley: The Secretary of State will be aware that 50 per cent. of staff at the Department who are at a predetermined level will be rated "poor", and that only 10 per cent. can be rated "excellent". Under the previous scheme, 30 per cent. of staff were rated "excellent". As 97 per cent. of staff voted against the proposal, does he agree that it is unhelpful for the public to have to deal with demotivated staff, and will he think again about this proposal?

Andrew Smith: I do not accept the hon. Lady's categorisation of the proportion of staff who would be rated "poor", or the other figure that she mentions. However, we do recognise the concerns expressed by our staff, and we will undertake a continuous improvement review of the new system over the summer, following the end of the appraisal round. We have invited our trade unions to contribute and I hope that they will do so, so that together we can continue to drive up performance, staff have a more rewarding job, our customers get a better service and we give the taxpayer better value for money.

Peter Kilfoyle: Let me take up the concerns of staff and my right hon. Friend's concern for them. According to figures issued by the Office of the Deputy Prime Minister two weeks ago, the Breckfield ward in my constituency is the most deprived area in the country and the epicentre of what the Treasury describes as the biggest poverty cluster in the country. However, last week I was given to understand that there was a strong probability that the pension centre, which is the single employer of note in the area, will be closed—scrapped and gone—in the name of efficiency. Some 316 people face the prospect of the scrapheap unless alternatives are found for them. I have spoken briefly to my right hon. Friend about the matter, but what guarantees can he give loyal staff in an area of high unemployment and high need? Under the aegis of the Government's stated intention to relocate jobs from Whitehall to the regions, and bearing in mind the fact that his is the Department of Work and Pensions, what does he intend to do to ensure that those people do not lose their livelihoods?

Andrew Smith: I acknowledge my hon. Friend's dedication to the needs of his constituents and I appreciate how difficult this news was. As he said, we spoke at the time of the announcement. When the number of centres has to be reduced—as it must—it is never easy for management to decide where it is to happen. The decision was the product of a careful review, although that will come as little consolation to those who face the possibility of losing their jobs. I would be pleased to meet my hon. Friend further to discuss how we can move forward, but, as I said to him before, no effort will be spared to try to find those members of staff alternative jobs, whether by way of redeployment in the DWP or elsewhere. With the movement of jobs out of the south-east, following the work of the Lyons review, we are considering destinations for those jobs in areas such as the ward he describes. I shall work closely with him, other local Members of Parliament and the local authorities to do everything we can to ensure that the closure of the pension centre does not mean that those people face a life without work.

David Willetts: I have been looking at the Department's annual report on its performance, and I draw the Secretary of State's attention to page 133—"Managing Attendance". Will he confirm that his Department had a target for sickness absenteeism in 2003 of eight working days lost per person per year? Will he further confirm that in reality 12.7 days were lost per person in 2003? Why was the performance so far below the target, and why should we believe anything that the Government say about efficiency savings when they cannot deliver such an elementary objective?

Andrew Smith: As the hon. Gentleman will know from previous exchanges, we recognise that the sickness absence rate is not good enough and that further progress must be made to hit the target. None of us expects taxpayers to subsidise a higher rate of sickness absence in the public sector. We have taken several steps, including making it clear to managers that sickness absence must be managed downwards, both by tackling its causes by improving occupational health in the workplace and by taking tough action against those who abuse the system. We have introduced mandatory return-to-work interviews and tighter disciplinary procedures and we are looking further at evidence of best practice and what works effectively in other businesses.

Social Fund

Harry Barnes: How many of the families who have qualified for child tax credits have as a consequence been removed from access to the qualifying benefits which would make them eligible for consideration for discretionary grants or loans under the social fund.

Chris Pond: We estimate that fewer than 50,000 families will be moved off benefits that would have qualified them for consideration for a social fund budgeting loan or community care grant. The vast majority of those families stand to gain substantially from that change, many by more than £20 a week, and will continue to have access to crisis loans and elements of the regulated social fund.

Harry Barnes: To be considered for a discretionary grant or loan under the social fund, families have to be in receipt of a qualifying benefit, such as income support, but have not child tax credit payments moved some needy families out of that qualifying regime? Will that not get worse when the child benefit element is migrated into child tax credit later this year? Can we not get round the problem by making maximum child tax credit payments a qualifying benefit as well?

Chris Pond: My hon. Friend will understand that we want the discretionary social fund to be focused on those who need it most, which normally means those on income support, but we shall continue to look at ways of improving the social fund and access to it, in the context of wider changes in its operation.

Disability Living Allowance

David Taylor: How many people were receiving disability living allowance in (a) the east midlands and (b) England and Wales in (i) 1990, (ii) 1997 and (iii) 2004; and how many of them were registered as unemployed in each year.

Maria Eagle: The requested information for 1990 is not available because disability living allowance was not introduced until 1992. As at 28 February 2004, the latest date for which information is available, about 2.2 million severely disabled adults and children in England and Wales were receiving disability living allowance, 10,400 of whom were also receiving a jobseeker's allowance. In the east midlands, about 185,000 severely disabled adults and children were receiving disability living allowance, 900 of whom were also receiving a jobseeker's allowance.
	In 1997, just over 1.5 million severely disabled adults and children in England and Wales were receiving disability living allowance, 10,800 of whom were also receiving a jobseeker's allowance. In the east midlands, about 126,000 severely disabled adults and children were receiving disability living allowance, 1,100 of whom were also receiving a jobseeker's allowance.

David Taylor: When last in power, the Conservatives were shameless in manipulating unemployment figures by shunting the jobless on to other benefits. Now their media acolytes and indeed, earlier, the hon. Member for Canterbury (Mr. Brazier), who is no longer in the Chamber, level the same charge against the Government. Can the Minister comprehensively strangle that canard and summarise any policy changes since 1997, either in the way that unemployment figures are calculated or in eligibility for DLA or incapacity benefit?

Maria Eagle: I am not sure that I know how to strangle a canard, never mind comprehensively, but perhaps I can attempt to explode a myth. Indeed, the figures from the constituency of my hon. Friend actually   do that. In North-West Leicestershire, JSA unemployment is down by 55 per cent., employment in that region of the east midlands is up by 104,000 and about 84 per cent. of his working-age constituents are in work. We have seen a fall in the number of people on JSA and an increase in the number in work, and a small increase in his constituency in the number of people on incapacity benefit. That explodes the myth—I am not sure what to do about strangling canards.

Pension Credit

Win Griffiths: What percentage of eligible pensioners are claiming pension credit in (a) Bridgend, (b) Wales and (c) the UK.

Malcolm Wicks: We cannot estimate eligibility with precision at the regional or constituency level. Up to 31 May, 2.5 million pensioner households, including more than 3 million individuals, were receiving pension credit in Great Britain. Of those, nearly 180,000 people are in Wales. I am also pleased to inform my hon. Friend that 4,405 individuals in Bridgend now receive pension credit, with an average award of £42.62 a week.

Win Griffiths: I thank my hon. Friend for that response. I am sure that the statisticians scattered about the United Kingdom could put together a programme to enable us to make the estimates, but can he tell me what further steps the Department will take to encourage more people to apply for the credit? From my experience, I know that a number of pensioners who have applied lately were amazed at how easy it was and at how helpful the phone line was in enabling them to get their forms filled in and benefit received.

Malcolm Wicks: We are increasingly going local with the take-up campaign's local advice surgeries and the excellent work of our local Pension Service, and people are pleasantly surprised when they realise that they can apply for pension credit over the telephone. Indeed, I read of a case study in The Daily Telegraph—so it must be true—where a man who had applied on behalf of his elderly mother-in-law said:
	"I found the phone form-filling service to be first class, sent all the information requested, and my mother-in-law quickly received her extra pension . . . Again, everybody was most helpful."
	Certainly, in Porthcawl, I know of case studies where people thought that they might be not eligible for pension credit, but £93 a week was awarded in one case. They said:
	"To say we are pleased would be an understatement."
	We need to go local, and we will.

Nigel Waterson: Can the Minister confirm that the figures that his Department produced only today show that, between now and 2014, the projection of individuals eligible for pension credit will rise from 4,850,000 to 6,550,000—an increase of 35 per cent.? Should his own assumption that 1.4 million of the poorest pensioners never claim pension credit be increased proportionally to show an extra 500,000 people by 2014 not claiming what they are entitled to?

Malcolm Wicks: The crucial thing is that the pension credit has been a success. More than 3 million individuals now receive it and the older elderly particularly benefit—the very group who were neglected by the last Tory Administration. In terms of gender, it is important to note that, of those 3 million individuals, 2   million are women, who often have the poorest pension record and whom we are now targeting. I only wish that the hon. Gentleman, instead of being cynical about the pension credit, would get out into the community and help to make it an even greater success.

Nigel Waterson: Do not those figures show the inexorable rise in means-testing projected under this Government? Is it any wonder that a recent survey conducted for Age Concern England showed that nine out of 10 pensioners receiving pension credit were not happy with the pension credit process and that they wanted the Government to provide a higher basic state pension? Will the Minister now look seriously at the Conservative policy of restoring the link with average earnings?

Malcolm Wicks: I will look seriously at Conservative policy when I see a serious policy, rather than the absurd apocalyptic vision that the hon. Gentleman is presenting, according to the national prints today: a ridiculous idea that what he calls a pension crisis—we call it a pension challenge—can be equated with the threat to this country from international terrorism. I think that he should grow up in his analysis.

Child Support Agency

Anne McIntosh: If he will make a statement on the level of error in Child Support Agency decisions.

Chris Pond: Last year, 85.7 per cent. of decisions on old scheme cases were correct to the nearest penny—the best ever level of accuracy, against the target of 82 per cent.—and 14.3 per cent. contained errors. From a sample of new scheme cases taken in February and March this year, 82 per cent. of decisions were correct to the nearest penny, against an agency target of 90 per cent. We will not be satisfied until we get accuracy to the highest levels that we target.

Anne McIntosh: Will the Minister undertake to take a personal interest in the individual cases of error found among constituents who live in the Vale of York? Such errors are deeply distressing and stressful for the individuals involved and cause a great deal of upset. Will he also look into a case that has just to come my attention where a father who is in receipt of incapacity benefit is, in fact, working for a family firm and not making any payment? That is clearly an error that has not yet been identified. Will he take a personal interest in that case?

Chris Pond: We understand the hardship and heartache that can be caused when errors occur, both for parents with care and non-resident parents, which is why we are doing everything that we possibly can to ensure that there is as much accuracy as possible. I, or my noble Friend Baroness Hollis, would be happy to talk to the hon. Lady about specific cases to find whether there is anything further that we can do to help to resolve them.

Gordon Prentice: We all know of individual case examiners who have found CSA error, after which they often recommend a consolatory payment. I have a constituent whose life was put on hold for more than two years, during which he lost his driving licence, who was offered a consolatory payment of £250. What is the average amount paid to people who have suffered at the hands of an incompetent CSA, and what are the Government going to do about the problem?

Chris Pond: My hon. Friend will understand that averages are not always terribly helpful in such circumstances because payments relate to the details of each individual case. He will not expect me to comment on those cases. However, we want to ensure that people who have suffered due to errors that the agency should not have made are properly compensated. I extend the offer that I made to the hon. Member for Vale of York (Miss McIntosh). If my hon. Friend would like to discuss individual cases, I am sure that my noble Friend Baroness Hollis or I would be happy to do so.

Steve Webb: The Minister will know that the independent case examiner deals with the most difficult cases from constituents who have had no satisfaction from the CSA. Last week, she produced her annual report, which showed a 50 per cent. increase in complaints during the first year of the Government's shiny new CSA system. I think that the Minister admitted to the hon. Member for Vale of York (Miss McIntosh) that the new, simple "really-easy-to-do" system had more errors in it than the old system. When will he admit that the new system has failed?

Chris Pond: I am sure that the hon. Gentleman has read the report carefully, as have I. He will be aware that only 0.15 per cent. of CSA clients complained last year and that more than half the increased number of cases were not accepted for consideration by the independent case examiner. However, she pointed out:
	"As the year started, the Child Support Reforms had just come into effect. It is not surprising that the major legislative, system and organisational changes faced by the Agency in implementing the Reforms have engendered a variety of problems and resulting complaints."
	There are reasons why there has been a substantial increase—it is actually a 31 per cent. increase—in the number of cases that could be referred to the independent case examiner, but we are not complacent. We have firm targets on improving accuracy, and we intend to do that.

Peter Pike: Given the welcome news about the improvement in the accuracy of CSA cases, will my hon. Friend tell me when we will complete the transfer to the new scheme? People are getting agitated while waiting to move from the old system to the new one.

Chris Pond: We understand the impatience of some clients of the CSA, although there is often a difference of opinion between parents with care and non-resident parents. I understand the impatience of hon. Members for the transfer to a system that we all think will be simpler and more effective. However, my right hon. Friend the Secretary of State has said on several occasions that we will not transfer old cases to the new system until we are absolutely certain that the technology is working effectively. It would be irresponsible to do so before that time, so I cannot give my hon. Friend a date on which it will happen. We will make the transfer as soon as it is responsible to do so.

Pensioner Poverty

Laura Moffatt: What measures he has taken to eradicate pensioner poverty.

Andrew Smith: We have taken many steps to tackle pensioner poverty, including the introduction of pension credit and winter fuel payments and a 7 per cent. real rise in the level of the state pension. As a result, we will be spending nearly £10 billion more a year on pensioners, including £5 billion more on the poorest third. That means that the poorest pensioners are on average £33 a week better off than they would have been under the 1997 system. Relative pensioner poverty is down by 500,000, with absolute poverty down by 1.8 million.

Laura Moffatt: Will my right hon. Friend join me in paying tribute to organisations such as the Crawley pensioners action group that continually draw attention to issues relating to our poorest pensioners. Does he agree that those community groups help to raise such issues and ensure that pensioners know about all the new benefits available to them through their campaigning activities and that they play an essential part in improving pensioner incomes?

Andrew Smith: Yes. I am pleased to join my hon. Friend in praising the work of the Crawley pensioners action group, with which I know she works closely. Such groups—in Crawley and up and down the country—not only make an invaluable contribution to the debate about pensions and future pensions policy, but enrich our democracy in many other ways. The active engagement of senior citizens in assessing and working with services locally, and in helping us to formulate policy, is invaluable. We are developing closer partnership working between the Pension Service and such groups and there is funding available through the new partnerships fund, of which I will send her details.

Nicholas Winterton: Will the right hon. Gentleman have a word with the Chancellor of the Exchequer, with whom he worked for many years, to see whether, to reduce pensioner poverty rather than increase bureaucracy, the Chancellor will entirely exempt from taxation the state retirement pension for all, and reduce the rate of taxation on all pensions and annuities for those who are responsible enough to save for their retirement years? Is that not the way to encourage a reduction in pensioner poverty without increasing bureaucracy?

Andrew Smith: It is not increasing bureaucracy to operate the pension credit in the effective way that we are, given the example cited in Saturday's edition of The Daily Telegraph, to which my hon. Friend the Minister for Pensions referred. More than 3 million individuals are getting that money, and it is much needed by them. I would hope that the hon. Gentleman would welcome the progress that we are making on that and join us in pressing for higher take-up.
	On the hon. Gentleman's points about taxation, of course I speak to the Chancellor about those matters. The problem with the hon. Gentleman's proposal is that it would involve a redistribution of income from poorer working people to more affluent pensioners. On reflection, I think that he will see that that would not necessarily be the fairest thing to do or the best use of available resources to ensure that they reach the pensioners who need them most.

Pension Protection

Jonathan Sayeed: If he will permit unclaimed assets to be used to offer further assistance to those occupational pension scheme members who will not be covered by the pension protection fund.

Malcolm Wicks: The Government laid a report on 30 June on their research into the numbers affected where pension schemes wind up underfunded with insolvent employers. That suggests that some 65,000 people face significant losses of more than 20 per cent. of their expected pensions, of whom around 35,000 face losses of over 50 per cent. That confirms that our commitment of £400 million of public money over 20 years provides a sound basis for a worthwhile assistance scheme. We hope that industry will add to that.
	As for unclaimed assets, my right hon. Friend the Chancellor made it clear in the March Budget that we want as much as possible to reunite unclaimed assets with their rightful owners. That is our No. 1 priority. Where the assets cannot be so reunited, they should be reinvested to benefit the whole of society. There are no plans to use such assets to provide assistance for those people who have lost pensions.

Jonathan Sayeed: That is a very disappointing answer. The Minister knows that £20 million a year is just a small proportion of the loss that has been suffered by those pensioners. First, does he accept that that is the case? Secondly, as the Chancellor has already taken his cut of the unclaimed assets, would it not be much better to assist pensioners who face real hardship by allocating that money when it is clearly proved to be unclaimed?

Malcolm Wicks: I do not accept that the money that the Exchequer has made available—£400 million—is a small proportion. It will enable the restoration of a significant proportion of people's pension rights, and that is important. The assistance scheme is a major move in the right direction. What was disappointing was the Conservative Opposition asking the House to decline to give the Pensions Bill a Second Reading.

Dennis Skinner: Will my hon. Friend look seriously at the claim by Anglo United, which used to be Coalite Products Ltd., because a number of people are affected as a result of changes that took place in the company some time ago? Will he tell me in writing whether they are included in the scheme that he announced a few weeks ago? It would be helpful to know that they are, and I am expecting good results.

Malcolm Wicks: Of course, we are looking at the details of all schemes to see whether their members are eligible for the assistance package. We now have research evidence on the numbers affected and are in consultation with trade unions and others to get the details right with a view to laying regulations later this calendar year and putting a scheme in place by spring next year so that benefits can be paid soon after. I will, however, write to my hon. Friend about the case that he raised.

Carer's Allowance

Huw Edwards: How many carers in (a) England and (b) Wales are in receipt of carer's allowance.

Maria Eagle: On 28 February 2004, the latest date for which information is available, some 351,000 carers in England and over 29,000 carers in Wales were receiving carer's allowance.

Huw Edwards: I acknowledge the improvements that the Government have made to carer's allowance, but does my hon. Friend accept that it is the lowest income replacement benefit of all at £44.35? Will she acknowledge the campaign to try to increase it to the level of the state pension, which would be a significant improvement in the provision for 400,000 carers and one more measure to add to the many that the Government have introduced to increase provision for carers?

Maria Eagle: I am glad that we have reached a question about carer's allowance, which is something that I can talk about at length, if you would allow me, Mr. Speaker. I congratulate my hon. Friend on his well-known efforts on behalf of carers. He is recognised in the House as a persistent and effective advocate for their rights and opportunities, not just in his own constituency but throughout Britain. I am aware of the campaign highlighted by Carers UK in the recent carers week to increase carer's allowance.
	My hon. Friend thinks that £44.50 or so a week is at the lower level of income maintenance, but carer's allowance can give rise to other payments. Some 300,000 carers are eligible for carer's premium in the income replacement benefits and the Government recently increased that premium by more than £10 a week, so there is an additional £25.55 a week, Mr.   Deputy Speaker—I am sorry for demoting you, Mr. Speaker—in income-related benefits. A slightly different payment—

Mr. Speaker: Order. The Deputy Speaker will be on duty by the time that the hon. Lady finishes.

Simon Burns: Does the Minister acknowledge the tremendous work and contribution of carers throughout the country? The figures that she gave the House suggest that a significant number of people are not benefiting from the allowance and I suspect that a number of my constituents who do a fantastic job, day in, day out, caring for others may be ignorant of their entitlement. What assurances can she give my constituents and those of other hon. Members that the Department will draw attention, through advertising and other targeted means, to the fact that they might benefit from the allowance?

Maria Eagle: The hon. Gentleman is right that many carers eligible for carer's allowance do not claim it, but 420,000 do so. We make every effort to make clear to people who interact with the benefits system what benefits are available and many local carers' groups also undertake such work. I am sure that, as a result of efforts by the Department, hon. Members and carers' organisations, carers who may benefit from those payments will find out about them and apply for them. They can now do so via the internet, as the allowance is one of the first Government benefits that can be e-claimed and 3,400 people have already made such a claim.

Mr. Speaker: I thank the hon. Lady for her brief reply.

Point of Order

Nicholas Soames: On a point of order, Mr. Speaker. Given that defence is the first charge on any Government, and given that there are now more troops on operations overseas than at any time since the 1950s, are you aware that the Secretary of State for Defence will come to the House on Friday 16   July—a private Members' day—to announce substantial cuts in both manpower and capabilities in the armed forces? Do you agree that such an important announcement should not be made to Parliament on a Friday, and that to bury bad news in such a way the day after two by-elections is hopelessly unacceptable and serves to compound the Government's endless felonies in that regard?

Mr. Speaker: There will be at least one session of business questions before 16 July when the hon. Member and others may be able to raise that matter, and there are the usual channels. If there is deep concern about the matter, I urge the hon. Member to seek to have it negotiated through the usual channels.

Nicholas Soames: Further to that point of order, Mr. Speaker. I shall indeed pursue the action you suggest, but may I ask you to make a general point that announcements of such importance should not be made on a Friday, when many Members are unable to be present in the House because of duties elsewhere? It is quite wrong that such an important announcement, touching on the security of the country and the future of our armed forces, should be made on such a day.

Mr. Speaker: It is difficult for me from the Chair to make a judgment about which statements are important and which statements are less important. It is not for me to be drawn into that argument.

BILL PRESENTED

Foundation for Unclaimed Assets

Mr. Frank Field, supported by Mr. Jon Owen Jones, Mr. Derek Wyatt, Kevin Brennan, Mr. David Willetts, Mr. Nigel Waterson, Mr. Steve Webb, Annabelle Ewing, Sandra Osborne, Rev. Martin Smyth, Mr. Jeffrey M. Donaldson and Adam Price presented a Bill to establish the Foundation for Unclaimed Assets and make provision as to its functions: And the same was read the First time; and ordered to be read a Second time on Friday 15 October, and to be printed. [Bill 131].

Opposition Day
	 — 
	[15th Allotted Day]

Postal Services

Mr. Speaker: I have selected the amendment in the name of the Prime Minister.

Michael Fabricant: I beg to move,
	That this House notes the failure of Royal Mail plc to deliver first and second class mail reliably and on time and regrets the damage this is doing to businesses and private customers alike; notes with particular dismay the threatened closure in Leicester of the Knighton Church Road Post Office, Knighton, and the East Park Road Post Office, Spinney Hills; calls on the Government to end the uncertainty facing the future of rural post offices as a result of the Government's refusal to announce further funding until after 2006; deplores the inadequate consultation procedure of the Urban Reinvention Programme despite the Government's recent announcement to review urgently the arrangements for the consultation currently employed; expresses continued concern about the Government's implementation of the different Direct Payment options which has caused significant problems particularly for elderly and disabled customers in Stechford, Shard End and Hodge Hill in Birmingham; condemns the Government for its failure adequately to promote the take-up of Post Office Card Accounts; and further calls on the Government to provide more details on the implementation of the Exceptions Service.
	You will have heard of the Midas touch, Mr. Speaker. Unfortunately, the Government seem to have the Frank Spencer or Del Boy touch. No matter how much taxpayers' money they throw at a problem, it all goes horribly wrong. No wonder, then, that so many people feel let down by Labour—and so it is with our postal services, which we must never forget the Government own. Too many aspects of Royal Mail's operations are failing, and that is a matter of grave concern to both sides of the House. Of course, many thousands of postal workers and management take their job seriously and are highly professional, but a minority are not.
	On 6 May this year, the Secretary of State for Trade and Industry apologised to the House and to the people of this country for Royal Mail's failings. She accepts that the buck stops with her, and I give her full credit for that. However, it is not unreasonable to say that an apology is not enough. The Government have a duty to ensure that standards rise.
	In 2001, the Royal Mail Group recorded a huge loss of £1.1 billion. I might add that that was £1.1 billion of taxpayers' money. With fresh management, that has been turned around to some extent, to a profit of £220   million in 2003. That is without question a considerable achievement, and a welcome one at that. It came, however, at considerable cost.
	In order to prevent the company from haemorrhaging money at an alarming rate, a tough restructuring process was announced by the Secretary of State in March 2002. I am not here today to argue that many of the tough decisions that have been made were not necessary: they were, but their implementation and the methods employed have been immensely damaging.

David Cameron: Does my hon. Friend agree that one of the ways in which the Post Office has cut its costs is by getting rid of two deliveries in a day? Is he aware of the problem that some businesses, especially in rural areas, are facing, which is that the single delivery is now coming too late for the banks' cut-off time for same-day cheque crediting? For small, growing businesses in constituencies such as mine, that is calamitous and it needs to be sorted out. If we are to have one delivery a day, it needs to be made in good time.

Michael Fabricant: My hon. Friend, who is an assiduous Member and constituency MP, raises an important point. The problem to which he refers is creating difficulties not only for growing businesses, but for well-established mail order firms, as I shall mention later. The biggest problem of all, which I shall also mention later, is uncertainty. People could plan ahead if they knew precisely when the delivery was going to be made, but in so many areas—not only rural areas, which he mentioned, but urban areas—the time of the first delivery seems to differ from day to day.

Gillian Shephard: My hon. Friend and my hon. Friend the Member for Witney (Mr. Cameron) mentioned the problems caused for businesses by a single delivery postal service. Will he comment on the extraordinary case of 49 packages sent to East Anglian MPs labelled "Postwatch misdelivery campaign" and posted on 13 May, none of which was delivered to Members of this House? It is indeed a mysterious occurrence, on which the chairman of the Post Office can throw no light, save to ask me what the turnaround time is for letters in my office. Does my hon. Friend have any points to make about that?

Michael Fabricant: If the issue were not so serious, it would almost be a laughing matter. I wonder whether the problem arose because of unreliability in the postal service or whether it could be connected—perhaps the Minister will expand on this when he replies—with the question of deliveries during the general election, when some items of mail were not delivered. It is not for Post Office workers to decide whether a Post Office item should be delivered, so the question is whether it was incompetence or deliberate action by Post Office workers that prevented what was issued by Postwatch from being delivered.

Gillian Shephard: I thank my hon. Friend for giving way again. The chairman of the Post Office, to whom I obviously wrote, replied:
	"We have no trace of the letters being posted, as they were reportedly posted over a post office counter. The most likely place of loss would be at that post office . . . which is one of our best with no previous problems."

Michael Fabricant: My right hon. Friend makes a serious point. If the Post Office and the Minister have doubts themselves about the service of Post Office Counters Ltd., it is a clear indication of how far standards have fallen in the past few years.

Martin O'Neill: rose—

Michael Fabricant: If I may, I shall move on, but I shall give way later.
	First, I shall examine post office closures. As urban and rural post offices continue to close across the country, the needs of our local communities and the vulnerable people within them are not being adequately met. In urban areas, the urban reinvention programme—in truth, the urban post office closure programme—is occurring at breakneck speed. Of the 9,000 urban post offices operating at the start of the programme, 1,211 have already closed, and that figure is set to rise to 3,000 by the end of this year.

Humfrey Malins: I am following my hon. Friend's argument with great care. The post office is a vital part of any community, and not only rural post offices but urban post offices are under threat, including five post offices in my constituency. Does my hon. Friend, like me, believe that post offices, which are an important social addition to any community, should be preserved?

Michael Fabricant: I agree that post offices should be preserved and that they play a vital part in the fabric of life in our constituencies. Like the National Federation of Sub-Postmasters, however, I "regretfully and reluctantly" accept the need for some closures, which so many people feel are badly handled. Local characteristics are not being taken into account; local communities are not being properly consulted; the long-term planning is inadequate; and a co-ordinated framework has not been implemented.
	On 13 January this year, I made those points at the Dispatch Box, and it must be said that the Government acknowledged the problems—again, I welcome that acknowledgement. In a written ministerial statement, the Minister for Energy, E-Commerce and Postal Services stated:
	"In particular, the consultation arrangements have been criticised. There has been mounting evidence that in too many cases Post Office Limited has not handled them appropriately, or with sufficient sensitivity."
	He went on to announce changes to the consultations, which would:
	"make them more inclusive and appropriate to achieve a viable network to serve the public after the programme is concluded."—[Official Report, 5 February 2004; Vol. 417, c. 49WS.]
	I thought, "Hooray! The Government are finally getting a grip," but I was just too trusting.

Gregory Barker: Does my hon. Friend agree that the issue concerns not only the nature of the closure programme, but the transparency of the process? When my constituents have campaigned to save post offices, they have been unable to get round the Post Office, which will not make available the business case on which the closure of local services is based. My constituents understand that hard economic decisions must sometimes be made, but, given that the Post Office does not reveal what its decisions are based on and offers cash incentives to close post offices, my constituents are sceptical about whether the process is anything more than closure by diktat.

Michael Fabricant: My hon. Friend is renowned for having his finger on the pulse, and he is right to say that the process is not transparent.
	Postwatch remains critical. It states that
	"there is little evidence of Post Office Limited attempting to mix and match 'leavers' and 'stayers' to produce a smaller but optimised network as envisaged by the Performance and Innovation Unit Report of 2000".
	Postwatch issued that statement after the Minister released his written ministerial statement that all things would change. I was gullible to believe that things would change—they have not.

Mark Field: I agree with my hon. Friend's line of argument on the urban reinvention programme. Does he agree that such decisions too often involve a deal being cut between the Post Office and the long-standing—or, perhaps, short-standing—local postmaster, rather than their being according to community need or finance? As my hon. Friend the Member for Bexhill and Battle (Gregory Barker) says, such a lack of transparency does not make local residents think that the process is being run fairly or firmly.

Michael Fabricant: As ever, my hon. Friend raises an important point. He refers to the compensation programme that is made available to post office operators—postmasters—who give up their post offices. That compensation is very generous and equates to around 30 months of profit, which is more than someone would normally get. The Minister may correct me if I am wrong. That is why Postwatch said that there is no real effort to mix and match to ensure that services are provided to those who need it in a given locality.

Martin O'Neill: rose—

Michael Fabricant: I give way to the right hon. Gentleman.

Martin O'Neill: I am not right hon.—I may well deserve to be, but that is for others to decide.
	I have two points for the hon. Gentleman. First, he made some very serious allegations about the nature of postal deliveries during elections. If those allegations are of any substance, they should have been referred to the Electoral Commission much sooner than today, with the appropriate evidence. If he did so, perhaps he could tell us about its findings.
	Secondly, although it is true that compensation is generous and that there are problems in relation to mixing and matching, the hon. Gentleman is not telling the full story. I understand that between one in three and one in four of all applications for early premature closures has been refused—in other words, of the 2,500 to 3,200 applications that have been made, around 800 to 900 have been refused. A substantial number of people who have tried to get out of the postal services for financial reasons have been refused. The hon. Gentleman is not giving the whole picture.

Michael Fabricant: The hon. Gentleman, who is Chairman of the Select Committee on Trade and Industry, should be a Privy Councillor, but sadly he is not.
	I tabled a question to the Minister about deliveries to which he gave a full and comprehensive written reply, so I can at least say that the matter is in the public domain if the Electoral Commission wishes to take up the matter.
	As regards post office closures, I am merely repeating what Postwatch says. I quote it again:
	"there is little evidence of Post Office Limited attempting to mix and match 'leavers' and 'stayers'".
	Postwatch was established to watch the Post Office as the guardian of the consumer. I would not make a statement of such importance were it not for the fact that Postwatch has made it.
	Postwatch also expresses particular concern about the future of post offices in deprived urban areas where there is nothing in place to discourage sub-postmasters from quitting and taking a generous golden goodbye from Royal Mail, thus creating gaps in the network. That point was echoed by my hon. Friend the Member for Cities of London and Westminster (Mr. Field). Indeed, the compensation offered by Royal Mail is often an encouragement to do just that. I think that Members on both sides of the House remain of the view that consultation remains inadequate.
	Let us take a constituency at random. When I was in Leicester, South last week, I learned that 10 post offices are due for closure in the city. More than 15,000 people signed a petition to keep them open. Mrs. Gladys Kenney, who is 86, is very worried about the closure of the West Knighton post office on Aberdale road. Her nearest post office is a 20-minute uphill walk away; and, like many other post office users, she is old and infirm. Why does the Post Office still refuse to take such factors into account? Fortunately, Chris Heaton-Harris, the Conservative parliamentary candidate in Leicester, South, is fighting to keep the post office open. He told me:
	"I want to retain the excellent local services provided by the post offices at West Knighton and Boundary Road and I am determined that other possible closures including the Knighton Church Road Post Office just don't happen."
	I support him in that fight. Chris has collected thousands of names on a petition, and I hope that the Post Office will listen to him and to other post office users.

Gwyneth Dunwoody: Will the hon. Gentleman give way?

Michael Fabricant: I shall give way to—is she the "right hon." Lady?

Gwyneth Dunwoody: No. The hon. Gentleman should know that we Select Committee Chairmen are the foot soldiers of Parliament.
	I have listened to the hon. Gentleman carefully but I am not clear about whether he is saying that the Post Office should not offer compensation to someone who runs a business and discovers for various defensible reasons that it is no longer viable or whether he simply suggests that that person should be forced to continue until inevitable bankruptcy.

Michael Fabricant: I am sorry if I have not made myself clear. I shall do so now. As in all things, it is a question of balance. Over-generous compensation that creates gaps in the network must be wrong, but no compensation at all would be equally wrong. My point—perhaps more important, that of Postwatch—is that the balance should be even to ensure that there are no holes in the network.

Gregory Barker: I am especially interested in my hon. Friend's comments because I was in Leicester, South last week. People there are angry, as are many Conservative Members who have heard the extent of people's anger about post office closures. The initiative to close those vital community assets does not come from the postmasters or people who run the post offices saying that they are not viable, but from Whitehall. Lucrative packages are being offered to bribe postmasters to close services in the full knowledge that that amount of money is unlikely to come the way of people on such incomes again. They are left in an invidious position. The initiative to close the post offices comes from Labour in London.

Michael Fabricant: My hon. Friend makes his point powerfully. The Secretary of State was right to accept responsibility. The way in which Post Office Ltd. and the Royal Mail Group were set up means that the Government own 100 per cent. of the shares. She accepts that the buck stops with the Government, who must ensure that the post office network remains viable.

Michael Weir: I have never been to Leicester, South and I have no intention of going there in the next week or otherwise. I am interested in the hon. Gentleman's comments and I agree with him up to a point, but given that post offices also closed under the previous Conservative Government, how does he define the gaps in the system? What would he put in place to ensure that gaps in the network did not occur?

Michael Fabricant: It is not a matter of how I define the gaps but how the Post Office defines them. The Post Office says that the distance from one post office to another in an urban area should be no greater than 1 mile if that can be avoided. Moreover, the Post Office is meant to take into account obstacles to people walking from one area to another. There is no point in the presence of a post office a few hundred yards away if a major motorway, canal or possibly Ben Nevis are in between. The Post Office must take that serious issue into account given that so many customers tend to be elderly. That is the point about balance that I made   to the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) earlier.
	My hon. Friends have mentioned the position in urban areas and I shall now move on to that in rural areas. Uncertainty about the future of the rural post office network hangs over it like the sword of Damocles. Sub-postmasters continue to leave in large numbers. Indeed, the number of closures in rural areas last year was up to 149 from 115 the previous year, despite Government support. An uncertain future means that it is difficult to find people who are willing to take over rural post offices that are for sale. The Government have provided a three-year funding programme to support rural post offices, and I applaud that. However, that finishes in 2006 after the next general election. What will happen then? Nobody knows, and that is the problem. It is essential that the Government make it clear how these businesses are to be made viable in the longer term, but they have consistently refused to do so. I hope that the Minister will step aside from that uncertainty when he responds to this debate, and make it clear what the future of rural post offices is to be.
	This uncertainty is having a devastating impact on rural communities throughout the country. Rural post offices play a critical role in sustaining the social and economic fabric of our society, and their closure has far-reaching consequences. Closures cause considerable anxiety to many people, particularly the elderly and the disabled and those who do not, or cannot, use private transport to get into larger towns. The Government have caused enough damage to rural communities, and they must now make the future of rural post offices clear. I hope that the Minister will do so today.
	Leaving aside the issue of post office closures, we have seen a devastating deterioration in the standard of the Royal Mail's delivery service, as my right hon. Friend the Member for South-West Norfolk (Mrs. Shephard) pointed out so well. In the latest report on mail delivery, all 15 of the existing 15 delivery targets were not met in the most recent financial year: 15 out of 15. This included a failure to meet the minimum targets for the delivery of both first and second class post. In the year to March, 90.1 per cent. of first class mail was delivered the next day, but the target is 92.5 per cent. Meanwhile, 97.8 per cent. of second class mail arrived on time, which is below the target of 98.5 per cent.
	Royal Mail is due to make compensation payments of about £80 million, on top of any penalties that the industry regulator, Postcomm, might impose. That is £80 million of taxpayers' money. Furthermore, there have been desperate problems associated with the decision to abolish the second delivery, as my hon. Friend the Member for Witney (Mr. Cameron) pointed out. In principle, that seemed like a sensible cost-cutting measure. However, the reality is that the one single delivery is now due at any time between 7 am and—well, who knows when? This is causing havoc for mail order companies and other businesses that need a quick turnaround. These failures to meet minimum delivery targets and the switch to a single daily delivery are causing considerable damage to both business and private customers, and need urgently to be addressed.

Gregory Barker: My hon. Friend is being extremely generous in allowing me to intervene on him again. Does he agree that the abolition of the second delivery effectively means the end of the next-day service for many people who have to leave home at a reasonable time to get into the office? They will no longer be able to have something sent to them in the certainty that they will receive it before they leave for work. That means the end of a proper first class post service.

Michael Fabricant: My hon. Friend is absolutely right. He comes from a business background, and he can anticipate the problems that businesses encounter. This is a serious issue—[Interruption.] I do not know what the hon. Member for Ochil (Mr. O'Neill) just said, but as Chairman of the Trade and Industry Committee he will understand the importance to trade, industry and businesses of a reliable postal service.

Martin O'Neill: rose—

Angela Browning: rose—

Michael Fabricant: Before I give way to the hon. Member for Ochil, I shall give way to my hon. Friendthe Member for Tiverton and Honiton (Mrs. Browning).

Angela Browning: I am glad that my hon. Friend has moved on to the subject of businesses in rural areas. I have heard of a lot of problems in that regard, not least from a major company in my constituency which used Royal Mail to send out a coupon that was time-limited, only to find that it had been delivered after the time limit had passed. It was a seasonal matter, and that company says that it is now desperate. My business community is crying out for some competition and reliability so that it can get on with its business, because Royal Mail is unable to assist it any more.

Michael Fabricant: That is an unfortunate fact. Often deliveries are time critical, and when a delivery is not made on time that creates real difficulties for business.

Martin O'Neill: I understand that, in a previous incarnation, the hon. Member for Bexhill and Battle (Gregory Barker) was a Merchant Banker—capital M, capital B. He probably started work rather early in the morning. Most people who do so never see the mail until they come back home, and there are arrangements whereby businesses can have it delivered at a given time on a regular basis. Once again, I do not think that the hon. Member for Lichfield (Michael Fabricant) is telling the whole story. A lot of businesses can get the mail delivered within reasonable bounds of their choosing. Most of the working population, especially those in the south-east who have to commute, must leave the house long before the mail arrives.

Michael Fabricant: With the greatest respect, I do not think the hon. Gentleman is quite in touch with reality. I have received hundreds of letters from different people who say that the Post Office says to them, "If you want the delivery, you can collect it yourself." However, often it is not practical for businesses or individuals to collect the post themselves. Anyway, what have we come to when the Post Office says, "We can't deliver to you reliably; you've got to go and collect it from the sorting office yourself"? That is nonsensical.
	More seriously, Richard Bradley tells me that, in Northampton, despite paying for his mail to be diverted to another address, that did not happen—even after making many complaints. What was the result? His postal ballot paper was lost. As a consequence, he was prevented from voting. Such mistakes have serious implications, not only for business, but for our democracy.
	Even services here in Parliament are not immune to the effects of such failures. On 12 May 2004, the Serjeant at Arms informed all Members of Parliament that, for a three-month trial period, starting on 1 June—we all saw that announcement in the all-party Whip—Members' incoming mail that is forwarded from Parliament to an external address would be sent by first class post instead of by special delivery. He did that for all the right reasons—it would lead to savings to the taxpayer of £500,000 annually. However, on 3 June—just three days, not three months, after the start of the trial—a new message came from the Serjeant at Arms saying that the trial had to be suspended
	"until Royal Mail can guarantee a First Class delivery service".
	If this were not so serious, it would be the subject of an Ealing comedy. Frankly, the complacency of Ministers is a disgrace.
	We have used Opposition time before to debate the Government's direct payment programme; we return to it again, and make no apologies for that, because we recognise the scale of the public's concern at the way changes are being made. The Government, in contrast, have been more reluctant to debate the issue in their own time. I am not surprised.
	To those of us across the House, not just those on the Conservative Benches, who suggested that there are too many steps needed to open a Post Office card account, the Secretary of State for Trade and Industry said:
	"Let us be clear: there are three steps that individual claimants need to take."
	Strangely, online, the BBC set out seven steps; Postwatch listed eight; and a Post Office analysis detailed 20, from the receipt of the Government letter asking for account details to the claimant's receipt of cash through the card account. To those of us who complained that the Government are biased against the Post Office card account in favour of bank and building society accounts, the Secretary of State said that
	"about 2 million Post Office card accounts have already been opened. That scarcely bears out the absurd allegations being made about how we are biasing the system, driving people away from the Post Office card account and making it impossible for anyone to open one. That is complete nonsense."—[Official Report, 24 March 2004; Vol. 419, c. 909–10.]
	Well, if it is "complete nonsense"—[Interruption.] Both Ministers say that it is. Why, then, did Age Concern, Citizens Advice, the National Consumer Council, the National Federation of Sub-Postmasters, the Communication Workers Union and Amicus, the National Federation of Women's Institutes, and members of the public across the country share our concerns?
	If it is "complete nonsense", why did a leaked Department for Work and Pensions document say to staff:
	"We need to pay most of these customers into bank accounts which cost 1p, rather than into Post Office card accounts which cost up to 30 times more. You"—
	post office workers—
	"should be aiming to get nine out of 10 new claimants"
	to use
	"bank accounts, with a small proportion paid through Post Office card accounts"?
	There it is in black and white—concrete evidence that the Government have been determined right from the very start to steer people away from the Post Office card account. I will happily give way to the Minister, who, I hope, is going to apologise to the House.

Chris Pond: No, I am going to set the record straight. As the hon. Gentleman well knows, the memorandum to which he refers was a Jobcentre Plus memorandum, and was therefore aimed at people of working age. As he well knows, the Post Office card account, whatever its other merits, cannot help people to be ready to accept a job, as it cannot be used to accept payments of wages. That is an important message and it would be irresponsible of Jobcentre Plus staff not to get it across to people actively seeking work.

Michael Fabricant: I hope that the Minister is not saying that people of working age should not receive benefits? Is that what he is saying? Is he saying that people of working age should be discouraged from opening a Post Office card account because it would make it easier to get benefits? Of course he is not. The point at issue is that the Government and the Secretary of State denied that they were making it more difficult to open a Post Office card account, but it is clear from the memo that that process is being made more difficult. Besides, if Post Office Ltd. says that it takes 20 steps to open a Post Office card account, is it not difficult? Of course it is.
	It is fair to say that many pensioners have chosen Post Office card accounts. Three million have done so, as the Government's amendment to our motion states. I have no doubt that the Minister will quote that number in his response, but the question is: how many more people would have chosen the account if the Government had made the process more simple? There are no grounds to congratulate the Government on card take-up. On the contrary, I congratulate those pensioners who, despite all the hurdles and obstacles that the Government have put in their way, have been able to open the account. It is they whom we should congratulate.
	The Secretary of State for Trade and Industry became remarkably aggressive about our many concerns in the last debate. Our claims were described as "complete nonsense" and "absurd".

Stephen Timms: Yes.

Michael Fabricant: As the Minister confirms from a sedentary position, the Secretary of State said that our claims were absurd.
	Yet, in the past few months, we have discovered that the Government have, very belatedly, started to take some steps to improve the Post Office card account process. A written answer from the Department for Work and Pensions, dated as recently as 7 June—perhaps the Minister for Energy, E-Commerce and Postal Services is not aware of this—stated:
	"We have already made some improvements to the Post Office card account process where real problems have been identified and continue to closely monitor its operation. We want to make further changes which would include less form-filling and a straightforward process for customers getting account details back to DWP via their postmaster."—[Official Report, 7 June 2004; Vol. 422, c. 84W.]
	At last, there is an admission that our concerns were justified. We—and the vulnerable constituents whom we serve—must be grateful for very small mercies.  Yet this has taken two years to put right. Even now, Postwatch says that the changes are not as extensive as it would have liked and that they do not tackle the large backlog of applicants who are stuck in the application process.
	Finally, I want to ask specific questions of the Minister. We welcome the exceptions service, under which cheques are issued to recipients of benefits, but the Government must do all that they can to publicise it. What steps are being taken to ensure that such publicity will happen? The cheque-based system is vulnerable to periods of disruption such as postal strikes, or even first-class post delivery. What contingency arrangements are in place to ensure that people will continue to receive their benefits in such circumstances? I look forward to the Minister's response.
	So there we have it. I suspect that the Government do care about the vulnerable; I suspect that they do care about the elderly; I suspect that they do care about businesses that use the Post Office. But it is what the Government achieve, and what they deliver with taxpayers' money, that will count in the end.
	The Prime Minister said that 2001 would be the year of delivery. That died a quiet death. With a million truants on our streets, a million people waiting for hospital appointments and a million illegal asylum seekers in our country, and with the north-south and rich-poor divides becoming even greater, there has been no delivery. In 2004, we have had the year of non-delivery—non-delivery of Britain's mail.

Stephen Timms: I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:
	"supports the Government's strategy for a viable Post Office network; welcomes the delivery by Royal Mail of 93 per cent. of first class letters the next day in the first half of 2003–04; shares the Government's disappointment over the drop in performance since then, which rightly falls short of customers' expectations; calls on Royal Mail and the unions to work together to improve the quality of service; notes that the closure of any post office is regrettable but supports the Government's view that, without rationalisation, unplanned closures would continue, leaving damaging gaps in the network; supports the Government's commitment to ensure that at least 95 per cent. of the urban population will live within one mile of their nearest post office; supports the Government's commitment to ensure funding of rural post offices until at least 2006; welcomes the changes to the urban reinvention consultation process and the extension of the consultation process from four to six weeks; supports the Government's move to Direct Payment and welcomes the fact that already more than half of customers are getting their benefits, pensions and tax credits paid straight into accounts, of which 3.2million are Post Office card accounts; notes that the Opposition wasted millions of pounds of taxpayers' money on the Benefit Payment Card scheme; supports the facility for those who cannot be paid through an account, particularly the most vulnerable older people, to receive a cheque payment; and recognises that change was needed and congratulates the Government for its strong, decisive action."
	I am delighted to have an opportunity to debate postal services and the post office network.
	No one disputes that the Post Office is a business that has had its problems. Just two years ago, Royal Mail was losing over £1 million every working day. It lost more than half a billion pounds in the financial year 2002–03, the year after the one mentioned by the hon. Member for Lichfield (Michael Fabricant). But last year, as the hon. Gentleman said, it made a profit—a small profit, it is true, but constituting an unmistakable sign that the business is being turned around, that the Government's policy is working and that the customers of the Post Office can look forward to big improvements. As the hon. Gentleman said, that is a considerable achievement, and it is to his credit that he acknowledged it.
	The reason that turnaround is being achieved is very straightforward: the Government are investing in Royal Mail. The last Government, for 18 years, simply used it as a cash cow, scandalously neglecting the needs of the business. Today we are seeing the investment that the business needs.

Simon Burns: If everything is so wonderful because of what the Government are doing, can the Minister explain why Royal Mail missed four targets in 2001–02, 12 in 2002–03 and all 15 in 2003–04?

Stephen Timms: As I have been saying, the business is being turned around. That process is under way as we speak. The hon. Gentleman knows very well that it is not possible to go on taking money out of a business and expect it to go on generating cash. That is what the last Government did: they took up to 93 per cent. of the profits. As Allan Leighton said when the losses were at their height,
	"these losses did not happen overnight".
	He said
	"unresolved issues and problems stretching back for up to a decade are reflected in these results".
	The truth is very simple. The investment that should have been made under the last Government was not made, and the business therefore inexorably got into the problems about which we have quite properly heard today, but which are now being addressed as the business is turned around.
	Past neglect has been at the root of the problems. If a business is to be healthy, there must be investment, and the last Government did not invest in the Post Office. After the failed attempt at privatisation, they simply allowed it to drift rudderless. There was no direction, and it fell sharply behind its international counterparts. By contrast, we have given the organisation a direction, turning the business around, investing on a completely unprecedented scale, and as a result giving the business a prospect not of the depressing decline of the past but of a bright future in a dynamic and competitive market. That is good news for the people who work in the Post Office, and good news for all of us too, because we all depend on the services that the Post Office provides.

John Horam: The Minister makes the point that the Post Office is turning round because of investment. On the contrary: it is turning around because it is dumping the second daily service and closing post offices up and down the land.

Stephen Timms: In a moment I shall spell out to the hon. Gentleman the unprecedented scale of investment that is being made. Of course, turning the business around is a difficult job. Neglect is easy, and if turning the business around had been easy, no doubt even the previous Government would have done it. However, doing so is hard, so they did not do it. We have been willing to make the hard decisions that were needed. More importantly, we have been prepared to make the big investments that are needed. The result will be a far better service ahead.
	To respond directly to the hon. Member for Orpington (Mr. Horam), over the decade from 1997 we will have invested more than £2 billion to modernise the post office network, and made more than £1 billion available to the letters business to implement its renewable plan, in order to return the company to sustainable profitability. It was the failure to invest in the previous 18 years or more that is at the root of the problems that we still see today.

Mark Field: There is one issue in respect of which the Minister cannot blame the past—the urban reinvention programme. He will have read in today's London Evening Standard that his own London Labour MPs—I note that none of them is on the Benches behind him—are complaining about the lack of transparency in the Government's urban reinvention programme, and about the fact that the figures have dripped out constituency by constituency, rather than giving the context throughout the capital. Does the Minister feel that urban reinvention is likely to work in London, and will he apologise for the lack of transparency that has vexed so many of his colleagues?

Stephen Timms: I will say a good deal about that programme in a few moments. However, in opening the debate, even the hon. Member for Lichfield acknowledged, a little grudgingly, that the exercise needs to be conducted because of the position that the business has got itself into.
	There certainly are problems for Royal Mail customers—no question about it—and they deserve a good deal better. Thanks to the determination of the management team that we brought in to turn the business around, and to the investment that we have been prepared to make, customers will get a much better deal in the future. Credit where credit is due: Royal Mail has held up its hands and acknowledged the problems. Allan Leighton and his team have given my right hon. Friend the Secretary of State and me a firm commitment to sort out the current quality of service problems. I am confident that the organisation will deliver on the commitment that has been made.

Gillian Shephard: The Minister is extremely generous in giving way. He has spoken of the need to take tough decisions, so I wonder whether he will comment on the criteria that the Post Office uses when deciding which post offices to close, particularly in urban areas. In the most deprived ward in my constituency, the Post Office has decided to close a post office that serves a community of 4,000 people that is two miles from another post office, which has an irregular bus service, and of which one third are elderly or disabled. That community also has a large number of young mothers with one or more children. The problems are therefore perfectly clear for the people whom the closure would affect. When I discussed the criteria that had been applied to select, unerringly, the ward with the greatest difficulties, Post Office officials told me that there had to be a certain number of closures per constituency. Does the Minister agree with that criterion?

Stephen Timms: No, I most certainly do not. We have insisted that in the 10 per cent. most deprived urban wards, if there is no alternative post office within half a mile of the post office that is proposed for closure, it should not be closed. If the right hon. Lady wants to drop me a line about the case that she raised, I will be happy to consider it.
	I want to address the concerns that have been raised about postal services, before going on to discuss the post office network. It is certainly the case that Royal Mail failed to meet quality of service performance targets last year. I have seen in my postbag the scale of the problems that have resulted and the anger that that has caused. In fact, in 2003–04 Royal Mail still delivered more than 90 per cent. of first-class letters the next day—the hon. Member for West Chelmsford (Mr. Burns) was right to draw attention to this issue—despite the impact of industrial action. However, 90 per cent. is not good enough and the level ought to be a good deal higher, as he rightly said.
	The picture is in fact varied. At lunchtime, I met a group from an organisation called North West in Business. A representative of one of the big accountancy firms told me that his company enjoys a superb postal service in its offices in Manchester and Liverpool, and that he does too, at his home on a farm in a rural area that receives van deliveries every day. He described the service as "superb". Elsewhere, however, that is not the case. The problem is a localised one. Royal Mail accepts that current performance is not good enough and is committed to putting things right. Agreement has been reached with the trade unions for a massive restructuring of the delivery and the transport systems, and everybody is working hard to get the service back to the levels that customers are right to demand.

Patrick McLoughlin: The Minister has just referred to the role that the trade unions play in this issue. Does he agree that the role that the trade unions have played in the past has led to some of the Post Office's problems? If he does, has he had any talks with the Minister for Lifelong Learning, Further and Higher Education to ask him why he should not take the blame for them?

Stephen Timms: My right hon. Friend has taken a considerable interest in the Post Office in his former career and as a Minister. We need a much closer partnership between management and the trade unions, and I am pleased with the progress that we have made in the past few months. My noble Friend Lord Sawyer has played a helpful role in that respect, and there is now much more optimism about the future. That area is another that was scandalously neglected by the previous Government.
	Allan Leighton was appointed as chairman to provide the leadership to turn the company around, and we have since made other changes to strengthen the board. We agreed a three-year renewal plan and we have put in place a financial package of more than £1 billion to support its implementation. That plan has just entered its final year. From the bleak position that the hon. Member for Lichfield mentioned, Royal Mail made an operating profit last year. That is impressive, but the turnaround to sustainable profitability is not yet complete. This final year is crucial as major changes are made to the way Royal Mail operates to remove inefficiencies and to tackle the quality of service problems that have arisen.
	A key element of the restructuring is the move to a single delivery. That is by far the most visible change to the company's customers and its introduction has not been straightforward. It has involved a massive reorganisation, but we must recognise that the UK is the last place in the world to move to single delivery. Second delivery used to account for 4 per cent. of the mail but 20 per cent. of the cost. The change was essential if Royal Mail is to be viable and competitive in the modern postal market. Those figures make it clear that the financial case for retaining the second delivery simply could not be made.

Mark Field: While I appreciate what the Minister says about the financial viability of a second delivery, surely he must realise that Royal Mail no longer has a meaningful monopoly, what with electronic mail and the other new ways of communicating? Will he talk to his friends in the trade unions or with Royal Mail to ensure that some long-term vision is implemented? The organisation needs leadership, because that is what has been lacking so visibly. All consumers of Royal Mail services now have a wide range of communication options, and they can say, "Enough is enough, whether we have one, two, three or four deliveries." E-mail, for example, provides multiple opportunities with umpteen different daily deliveries, and it is a direct competitor to the Royal Mail.

Stephen Timms: Leadership is precisely what Allan Leighton and his team have provided. The hon. Gentleman is right to say that the market is increasingly competitive and it will be even more so in the future. That is why it has been so important for the organisation to turn around as it is now doing.
	Each day, Royal Mail delivers more than 82 million items to up to 27 million addresses. The amount of mail for daily delivery every day is equivalent to the highest Christmas peak of 30 years ago, so we have not seen a decline in overall volumes. The number of addresses to which deliveries must be made has also increased significantly. Change is unavoidable and the competitive market is one of the reasons.
	A consequence of the change to single deliveries is that postmen and women will be delivering for longer, which means a later start on some routes in order to sort mail for delivery and put it into route order. The aim is to deliver to the majority of customers by lunchtime and for all rural deliveries to be completed by 3 pm.

Simon Burns: Will the Minister give way?

Stephen Timms: I want to make a little more progress before I give way again.
	The whole House will realise that change had to be made. For the most part, the change has gone reasonably smoothly and in most places things are now working well. In some places, however, there have been serious problems and my right hon. Friend the Secretary of State for Trade and Industry has been given Allan Leighton's personal assurance that those problems will be vigorously tackled, while the single delivery is being introduced, and that solutions will be found. Adam Crozier has taken personal responsibility for improving the company's performance and I shall be watching out to ensure that the problems are solved and that performance is restored to at least the level achieved last year, when there was next-day delivery of 93 per cent. of first-class letters.
	The post office network has been the subject of numerous debates in the House, with a further one today, reflecting the immense interest of all Members in the post offices in their area. Under the previous Government, the background was familiar: a failure to invest, resulting in inexorable decline—a decline that we have been determined to reverse.
	We brought in a new management team, led by David Mills as chief executive of Post Office Ltd. He has a successful background in banking and has been doing a superb job since his appointment. We have invested in the network; £500 million to computerise and connect every post office branch, which is one of the biggest IT projects ever undertaken in the UK and an unqualified success.
	We have encouraged the introduction of new products and services, taking advantage of the fact that IT allows electronic banking to be offered at every sub-post office in the country. We have recognised that the number of post offices in urban areas needs to be reduced to reflect the fact that fewer people are using them and so that the business has a viable future serving all our urban communities as well as our rural areas.

Malcolm Bruce: Will the Minister address the particular problems in Scotland, where the Scottish banks have not co-operated with the Post Office? There is a rundown of services and a switch away from benefit payments at post offices, but the option of receiving payment through a bank account will not be available in Scottish post offices. Does he have a separate plan for Scotland? In Aberdeen, where the Post Office wants to close 15 branches, when the city asked for discussions with the Post Office about council tax payments being made through local post office branches, the Post Office was not even prepared to discuss it. Can the Minister explain that?

Stephen Timms: On the hon. Gentleman's first point, every high street bank, including those in Scotland, is now offering basic bank accounts, which can be accessed at every post office branch, including those in Scotland. Secondly, there have been some encouraging discussions—several of my hon. Friends who represent Scottish constituencies have taken part in them—with at least one of the Scottish banks, which suggests that we may see some progress on that front. I agree that it is important for Scottish post office customers that we encourage the banks to consider opening up their accounts to access at post office branches, as we have seen on the part of Lloyds, Barclays and Alliance and Leicester in England and Wales.
	The programme that commenced at the end of 2002 is difficult and is causing inconvenience, but it is absolutely necessary to maintain an urban post office network with reasonable access for customers in every urban area. With about 16,000 branches, the network still has more branches than all the high street banks and building societies put together. Before the programme started there were more than 1,000 urban offices with more than 10 others within a mile. There is no longer sufficient business to sustain so dense a network, and to his credit, the hon. Member for Lichfield has accepted that.

Michael Weir: I notice that the Government's amendment to the motion reiterates their view that no one should be more than a mile from a post office. Although the latest letter that I have received from the Post Office about branch closures mentions that in passing, it also states:
	"It may be helpful to explain the access criteria agreed with Postcomm, the postal regulator, that 95 per cent. of people in the UK will have a Post Office branch within 5 km (3 miles) of where they live."
	Can the Minister explain which figure is correct? Is there to be a post office within one mile or within three miles? If it is to be three miles, most medium-sized towns could be served by one office in the centre.

Stephen Timms: At the end of the urban reinvention programme, at least 95 per cent. of residents in urban areas should live within 1 mile of their nearest post office. That clear criterion has been laid down for the whole programme. The alternative to the managed restructuring that is under way would be an unmanaged, unplanned contraction of the network, with ad hoc closures leaving a very uneven geographical spread of offices and some areas losing all access to post office services. The managed programme to reduce overprovision—difficult though it undoubtedly has been—is far preferable to the alternative of unco-ordinated closures resulting from falling income.
	I do not agree with the hon. Member for Lichfield in suggesting that the compensation available has been excessive. A standard formula, based on 28 months' income, has been negotiated with the National Federation of Sub-Postmasters. The 28-month figure for the value of a post office business is of long standing and well understood. We are effectively saying that the compensation is roughly equivalent to what sub-postmasters could have expected if they sold their businesses two, three or four years ago, before the changes of the past few years. That is fair. It is entirely reasonable that people should receive a decent price for their businesses—in many cases, after giving years of valuable service to their local communities. His remarks about excessive payments will cause great offence to the National Federation of Sub-Postmasters and its members.

Michael Fabricant: I am not commenting on the size of the thing—28 months may well be appropriate—and I certainly do not suggest that it should be decreased, but does the Minister not accept that Postwatch says that the closures have been patchy? Where closures have taken place, the distance between consumers in an urban area and the next post office can be more than a mile, and where the distance is less than a mile, sometimes—we gather from our correspondence that this happens more than sometimes—major obstacles, such as hills or major roads, prevent vulnerable people in our communities from getting to those post offices. Should those issues not be taken into account?

Stephen Timms: Those issues certainly should be taken account of, and they are being taken account of. The chairman of Postwatch has told me that the consultation process has improved significantly following my statement on 5 February, and that the process itself works well. That is not to say that there will not be closures that cause inconvenience to significant numbers of customers. I hope that the hon. Gentleman will recognise that the reality is that it is not possible to close a large number of offices in the way that we have to without causing inconvenience to some, but the issues that he raises are precisely those that are taken account of in the consultation exercise.

Alan Beith: The Minister will remember that, on 26 February, he replied to an Adjournment debate about the closure not of a sub-post office, but of a main Crown post office. Surely it is not part of any planned programme that there should still be no main Crown post office in Berwick nearly a year after the original closure? Although there is talk of a franchisee being found, does not that reveal that the Post Office should have a fall-back plan for such circumstances?

Stephen Timms: The right hon. Gentleman did indeed raise his concerns about that case in a debate with me some time ago. I am disappointed to hear that the case has not been resolved as yet, but he will acknowledge that it is not through want of trying on the part of the Post Office. A rather different category of case is involved from those being considered under the urban reinvention programme, but I will certainly find out from my officials what the latest developments on that branch are.

Patrick McLoughlin: Will the Minister give way?

Stephen Timms: No. I need to make some progress.
	The hon. Member for Lichfield surprised the House by drawing attention to issues in Leicester, South. Post Office Ltd. has not yet reached a decision on the proposal to close the Knighton Church road, or south Knighton, branch. The company is giving the proposal further consideration in view of issues that have been raised during the consultation by the community and Postwatch. The programme is not about only closures. The plan for the area includes the proposal to relocate a branch at Park Vale to a nearby convenience store to offer improved facilities for customers. If the proposals for Leicester, South go ahead, there will be £150,000 of improvements to the remaining branches in the area that will receive additional custom as a result of the closures. The previous Government did not undertake such investment, but it is now, thank goodness, coming into place.

Patrick McLoughlin: Will the Minister give way?

Stephen Timms: No, I need to make some progress.
	The network has been in decline for some years, and the programme will help to restore the confidence of sub-postmasters in their future prospects, while reducing the level of over-provision and leaving a viable network. That job had to be done, and the process has been given strong support by the National Federation of Sub-Postmasters. The increase in the business of the remaining offices, backed up in many cases by funding from the £30 million that we have made available for investment grants, will go a long way towards ensuring that the sub-postmasters who run them may have confidence in their prospects. That is vital for the future viability of the urban network as a whole.
	The £2 billion funding that we have made available since 1999 was the first money provided by any Government for the urban post office network. Such action was in stark contrast to the behaviour of the previous Government, who starved the Post Office of the investment that it needed. Some 20 million existing current account holders can now use banking services at every post office in the country. Universal banking services provide customers with free access to their basic bank accounts at post offices, and I am glad to say that there is a substantial growth in the number of those accounts that are being used.
	We have encouraged the introduction of a range of new products, the first of which was personal loans, which were made available at every post office in the country. The Post Office successfully provides travel insurance and is now the country's leading supplier of foreign currency exchange, which is a successful development.
	On Friday, I visited the Crown post office in my constituency of East Ham and met the new manager, Mrs. Jay Shri Patel. She gave me its trading figures, which every member of its staff now has the chance to see. The branch is not yet profitable, but there is much optimism that it will be as a result of the changes that are being made. Last year, its income from banking increased by 2.5 per cent., but so far this year that has increased by 19 per cent., compared with the same period last year. Its income from travel services has increased by even more than that, which has offset the loss of income from its benefit business. The new car insurance product has a great deal of promise. That is the picture that we want to see throughout the network in the future. The National Federation of Sub-Postmasters, Postwatch and Post Office Ltd.—three organisations with different perspectives—have all agreed that the programme is essential if we are to avoid the alternative of unmanaged decline, and hon. Members also recognise that hard reality.

Patrick McLoughlin: I have raised with the Minister on many occasions the closure of four of the five post offices in Belper. Does he think that that policy has lived up to the undertaking in the Labour party's manifesto at the last election, which read:
	"There will be increased incentives for people to take over and modernise post offices"?
	If there were five post offices, but there is now one, where is the increased incentive?

Stephen Timms: There are greater incentives for people to do exactly that, which is the purpose of the £30 million fund that sits alongside the funding agreed by the House in October 2002 to allow the programme to go ahead. We are experimenting with new ways of delivering post office services in rural areas. Above all, the incentive that people need to invest in the post office network is the prospect of a secure business future, so the process of rationalisation through which we are going is an indispensable contribution towards bringing that about.

Keith Vaz: I appreciate all the effort and work that my hon. Friend has put into the issue, but it remains the case that local people feel that they are not being listened to by those at Royal Mail. As he knows, there have been more than 10 post office closures in Leicester, although we are delighted that Clarendon Park post office has been given a reprieve. I am very grateful to the Minister for that, even though it is not in my constituency. The fact remains, however, that if people had confidence in the consultation process, the proper points that he is making would be understood by the public.

Stephen Timms: That is why I have made sure that Postwatch has played a key role from the beginning, and is able to examine each and every proposal and to monitor the programme as a whole.

Simon Burns: Will the Minister give way?

Stephen Timms: No, not at the moment.
	There have been more than 1,200 closures since the start of the programme following the vote by Parliament to provide funding. In more than 50 cases around the country where Postwatch has become convinced that a proposal should not go ahead, the decision has been reversed following public consultation. What my hon. Friend is rightly calling for is indeed what has happened. In addition, 57 proposals were withdrawn in the light of Postwatch's preliminary views and comments before the public consultation stage. About 200 proposals have been amended as a result of issues raised during consultation.
	Research carried out separately by Post Office Ltd. and Postwatch shows that nine out of 10 customers of branches that have closed under the programme have moved their custom to offices that the company predicted would benefit from additional custom as a result of a nearby closure. That is clear evidence that customers are continuing to use post offices and that the programme is achieving its objectives, boosting the businesses of the branches that remain.
	Of course the programme was always going to be controversial, but the vast majority of closures have been accepted as necessary and have attracted little criticism. Following concerns expressed in this House and elsewhere about the consultation, I asked Post Office Ltd. and Postwatch to review the arrangements and to propose changes to make them work better. I subsequently announced a number of changes in a statement on 5 February, and I am pleased that the process has worked much better since then.

Simon Burns: I do not know whether the Minister has been involved in any part of the consultation process in his capacity as a constituency MP, but I have to tell him that, regardless of the figures that he cites, the hon. Member for Leicester, East (Keith Vaz) is right. Seven urban sub-post offices have been closed in the past 15months in Chelmsford, and to be frank, the consultation process was a farce. The Post Office was utterly courteous in its dealings with those united in opposition to the closures, but it did not pay one iota of notice to the representations and just rammed through the closures.

Stephen Timms: As I have said, Postwatch has been able to take an independent view of each proposal, and where it has concluded that a proposal should not go ahead, the matter has been taken to the Post Office, an escalation procedure has been put in place, which I think has worked well, and as a result there have been a significant number of changes to proposals around the country. That is how the exercise should work.

Jim Cunningham: First, the initial consultation was all right until what was to be closed and not to be closed was published, and then it became very difficult to have any further meetings or discussions with the Post Office. I accept what my hon. Friend says about Postwatch. Secondly, many people have volunteered to take redundancy, for want of a better term, but there has been a problem finding others to take over the service where it might be needed. That is one of the problems that we have encountered in Coventry.

Stephen Timms: The intention behind—indeed, the justification for—paying compensation is to enable a branch to close, thereby supporting the viability of other branches in the area. My hon. Friend is right; one problem has been finding people to run the offices on the basis of the business as it was. That is one reason why we have had to make the changes—reducing the overall number of branches in urban areas and so making the businesses more attractive propositions for the future.
	Local post offices also have particular importance to those living in rural areas. The network of post offices serving those communities is especially important to maintaining local access to essential services for those who are less mobile than others. That is why we have taken steps to protect rural post offices. In October 2000, we placed on Post Office Ltd. a formal obligation to maintain the rural network and prevent all avoidable closures of rural post offices, in the first instance, until April 2006. Post Office Ltd. appointed a network of 31 rural transfer advisers, who often become closely involved with community efforts to reopen or save rural branches. They have had considerable success in finding alternative sub-postmasters to replace those who have left, locating suitable replacement premises where necessary, and encouraging community efforts to provide services to the local community.
	We have made £450 million available for Post Office Ltd. to maintain the rural network and prevent avoidable closures until at least April 2006, thus helping to ensure that reasonable access is maintained for all citizens to over-the-counter services in rural areas. To pick up the point made by the hon. Member for Lichfield, we will make decisions on future support for the rural post office network beyond 2006 in good time to allow for a smooth transition from the current arrangements. We are considering the options at the moment, and will make an announcement in good time. We want to minimise any uncertainty, both for sub-postmasters and for people in rural communities, and to take account of lessons from the pilots that are under way.
	Direct payment of benefits provides a modern, secure, efficient system that is cheaper to administer. It is not new for benefits to be paid into an account—indeed, it is increasingly the norm. Before the decision by the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Gravesham (Mr. Pond), and his colleagues in the Department for Work and Pensions to switch to making all payments by direct credit, more than 43 per cent. of benefit recipients already had payments made directly into their bank accounts, an increase from just over 25 per cent in 1997, when a dramatic change in people's behaviour began. Nobody should be surprised that more and more people want to use bank accounts. For example, 93 per cent of all new child benefit recipients and more than 90 per cent of newly retired pensioners choose to have their benefit paid directly into their account. The old order book system is out of date, as it is based on ration book technology. It is inefficient, open to fraud and abuse, and expensive to administer. It must be modernised to keep in step with changing customer needs and to reflect the fact that owning and using a bank account is now the norm. Over 87 per cent. of benefit recipients and 91 per cent. of pensioners already have access to a bank account.

Martin O'Neill: A great argument for the new system is that it will reduce the number of fraudulent claims and the loss and theft of benefit books, but how low are the figures, assuming that take-up is a wee bit higher than currently projected? We have heard the costs of the existing system, but what are the costs and, by definition, the savings of the new one? I do not believe that that has ever been put on the record before.

Stephen Timms: We certainly expect significant reductions, and I will ask the Under-Secretary of State, my hon. Friend the Member for Gravesham, to respond to that point in his winding-up speech.
	The changes, of course, will result in other benefits. Citizens Advice recently published a booklet on financial inclusion, in which it said:
	"The government, the banking industry and the Post Office should be commended for the progress they have made in establishing Universal Banking Services. The ambition to enable all people to own the most basic of financial services—a bank account—is one we share."
	Citizens Advice is right to celebrate direct payment as a method of financial inclusion—a goal that we all share. Post offices should be attractive places that offer services that people want to use and to which they want to return, not places that people are forced to use because they have no alternative. We share that vision with the Post Office, and increasingly it is being realised in practice.
	I conclude by taking the opportunity to praise the men and women who work in the Royal Mail. They have been much maligned by the media in recent months. The truth is that the vast majority of Royal Mail staff do a superb job with real dedication. They are honest and hardworking and they take pride in the work they do. They are a vital part of the fabric of our communities in rural and urban areas.
	The reforms of the services that we have introduced—greater commercial freedom for Royal Mail, independent regulation and a stronger consumer body—are providing the right framework for a modern, competitive postal market. It will maintain the universal postal service and give consumers more choice. It gives Royal Mail the opportunity to compete with confidence in an increasingly dynamic market. There have been problems. They can be overcome and they will be. We have given a clear message to Royal Mail and its trade unions that they must work together to restore public confidence urgently.
	As regards the post office network, we will continue to work with the company as it faces up to the challenges of changing demands from customers and society. I am certain that the organisation can look forward to a future much brighter than the experience of the past few months, and its customers can do so as well. I call upon the House to support the Government amendment.

Malcolm Bruce: I commend the Minister for the energy and enthusiasm with which he responded to the debate. He must almost believe everything he said, and believe that he could persuade the House. If the picture were as rosy as he describes, people would be clamouring to open post offices, rather than snatching the money to close them as fast as they can. That is the reality. Nobody wants to open a post office in the present circumstances. We have a long way to go before we can achieve even an equilibrium and a confidence in the future of the post office network that will encourage people to retain or move into the business. That is what concerns many of us.
	I shall deal first with issues relating to the Royal Mail service. It is true that the letters service has come back into profit in the past year, which is welcome. The loss in the previous year was partly due to the fact that in spite of the Royal Mail's application for a postal increase, it was denied for more than a year and the company lost £1 billion of revenue. Although Royal Mail should properly justify increases and ensure that it maintains efficiency, when costs have genuinely risen and the revenue is not allowed to rise, that clearly drives the organisation into loss. As a consequence of that, many of the savings come from reductions in service, rather than from the investment about which the Minister boasts.
	I accept that it is difficult to defend the long-term future of the second delivery, given the disparity between costs and customers. Most of us could be persuaded to accept that if we were confident that the standard of the first or only delivery was rising, rather than falling. Royal Mail has difficulty in creating confidence because it has only bad news to tell.

Michael Fabricant: The hon. Gentleman will recall that the Minister said that many other countries have only one delivery. Is it not the case that that one delivery is usually before 10 am and is reliable and predictable, whereas the Government are speaking of deliveries right up to 1 pm or 2 pm, and those deliveries are decidedly unreliable?

Malcolm Bruce: That is a point to bear in mind. Those of us who visit post offices, as we all do at various times of the year, have some sympathy with people who have to come in at 4.30 am, 5 am or earlier to sort and deliver the mail. I can see the difficulties in making them come in at 2 am. That is where investment is required to increase mechanised sorting, so that the whole process can be completed early enough to achieve an acceptable delivery time.
	This week, for example, I received representations from a company that has made representations to me before that its delivery has slipped back two or three hours. When a company complains, the Post Office endeavours to accommodate it by shifting the delivery around. That means that someone else's delivery is put back and, when they complain, the original schedule is reinstated. Until the whole delivery system is brought forward, the problem will not be solved; it will merely be moved about.
	A new development that has not been mentioned slightly puzzled me, and it is rather important. Last week, my local postie arrived and asked whether I liked his new transport. He said, "I've become white van man." He had parked a hire van outside my front door. I asked what had happened—I assumed that he had accidentally put his vehicle off the road. He said, "No, it is new policy in the Post Office not to own the fleet, but to contract it out and reduce its size."
	That is a serious point. If hired vans of any hue can go around masquerading as Post Office vans, it will have an effect not only on image, but on confidence. When people see the little red van coming up their drive, they know and have confidence that it is their local postie. Allowing some anonymous white van to deliver the mail clearly opens up the possibility for fraud, misrepresentation and lack of confidence. If there is a serious cost saving to be made, as I am assured there is at a local level, we should know the ramifications. This is not just a matter of diluting an image; it has serious further implications. I would be interested to know whether there is an answer and explanation at a policy level.
	Another service that I think many of us use personally, but which is also used commercially, is the household delivery service, whereby postal deliverers will deliver unaddressed mail along with addressed mail. That service is used by supermarkets, commercial operators and, believe it or not, by political parties to get their message through people's doors. It is increasingly difficult, however, to negotiate with the Post Office in order to transact such business, which must be bad for both the commercial and the public service operators that want to do so.
	My experience is that it is impossible to get a firm cost, time or schedule. Indeed, the clear indications are that the Post Office does not want such business, which is regarded as a nuisance. Private companies are moving into the field, charging more and not necessarily giving as good a service. Again, no rational explanation has been given. It seemed to us that the service was a good one, and that it was good for the Post Office to ride on the back of the fact that it was delivering to households anyway. It is not clear whether the Post Office has decided that such business is not profitable, that it does not want it and that it is prepared to leave it to private operators—if that is so, it would be better if it were open about it—or whether, as has been suggested to me, some other constraint is preventing it from expanding what should be a profitable add-on business that supports the rural network.

Russell Brown: Could it be that there is so much business of that sort and the demand is so great that the Post Office has to turn some of it away? That might be why it is not quick to respond. Like many other businesses, if it is inundated with work it will be slow to respond, thereby putting off a potential customer.

Malcolm Bruce: That may be true, but my experience—I have also talked to one or two colleagues—is that we do not get a constructive relationship in which the Post Office says, "If you bid for this, you can have it" or "We can't do it." Instead, we get a lack of response, firm dates and clear guidance, which is poor management, it seems to me.
	I do not know what such business represents for the Post Office, but it is going the right way about losing it. It is clear that other organisations think that it is worth stepping into that business and taking it away. As a customer, my local party—this point is relevant to everybody who uses such services—is now contracting privately, not out of choice, but because we cannot contract with the Post Office. That is unfortunate. I do not know whether there is an answer, but it would be appropriate for Royal Mail to explain why it regards such business as marginal or of limited interest. If such business is development business, it would be interesting to know why the Post Office is not developing it more efficiently and in a more organised way.
	A poor delivery service, the phasing out of the second delivery and a growth in competition are creating a worry about Royal Mail's future. When one speaks to it, it says that the most serious competition that it faces comes from the Dutch and the Germans. Most of its business is business-to-business business of the sort that is not based on delivering granny's post card. Businesses simply want guaranteed delivery on a large scale. They do not mind who does it, but they want reliability at a competitive price.
	If Royal Mail does not respond soon, it will find when it has put its house in order that a lot of the business has already gone elsewhere. That is a matter of concern. Indeed, Royal Mail's capacity to maintain a universal service would start to be called into question if it were to lose too much of its business to competitors. I do not share the Minister's confidence that the management can deal with that competitive threat.
	For most members of the public, concern about the mail pales into insignificance compared with the future of their local post office and post office services. Perfectly rightly, the Minister said that the culture has changed, and that people prefer to have payments made into their banks and no longer want cash from the local post office in the same numbers. None of us denies that point, and we all recognise that we must respond to it. However, many people, including those with bank accounts, want to use their local post office, whether to obtain cash, make payments or use other services. They want to know that such services will exist in the future, but that is not currently the case.
	I am slightly surprised that the Conservatives chose to debate this topic, because 3,344 post offices closed between 1981 and 1997 under the Conservative Government—2,543 post offices have closed since 1997 under the Labour Government. My concern is that few more than 14,000 post offices, half of which will still lose money, will be left at the end of the current process. Postwatch says that 250 post offices that closed in recent times should not have done so given their locations and the need for them, but such decisions cannot be revisited in order to reopen post offices.
	One of the most difficult tasks for any MP is to persuade the Post Office to open a new post office, even after a major population change occurs. During my 21 years in Parliament, I have succeeded precisely twice, and the second opening caused the Post Office promptly to close another post office in the same town, so my campaigning had a marginal effect.
	The Government have not made it clear what will happen in the future. If the branch network were reduced to 14,000 offices, half of which would lose money, what aspect of the business plan leads the Minister to believe that enough business, whether public or private, exists to secure a viable, long-term future? His assurance that the network will be stable at the end of the organised programme is belied by the fact that post office closures will continue once the programme is completed—they will continue haphazardly as people retire or decide to give up because they are not making money.

Michael Fabricant: Although the Minister assured us that the transition, which will occur from April 2006, to supporting rural post offices will be smooth, until an announcement is made—I noted that he was unable to make an announcement today, despite his being asked to do so—uncertainty will continue to exist, which makes people unwilling to open rural post offices.

Malcolm Bruce: The hon. Gentleman is right. I suspect that we must wait until closer to an election—perhaps a rural by-election—for an announcement, and I confidently expect such an announcement before the next election.
	The hon. Gentleman's serious point is that an announcement is needed, but an announcement will not solve the rural network's problem, although it will extend the uncertainty. This is not an argument for withdrawing money from post offices, but both rural and urban post offices want to know about guaranteed public business, access to services such as vehicle licensing and passports, and how long it will take for the private business that the Post Office is bringing on stream to provide viable business plans for individual post offices that make them worth investing in and that give them long-term futures.
	No one whom I have met in the post office business is confident. When I talk to postmasters and postmistresses, they say that they are hanging in until they retire, until they are told to go or until something happens, and not that they really want to be in the business.

Michael Weir: I am interested in the hon. Gentleman's comments and broadly agree with them. Like me, he represents a constituency that is partly rural and partly urban. Does he agree that sub-postmasters are trapped in a vicious circle because they do not know the future of the business but are having to go through the reinvention programme in urban areas, which is closing post offices? Does he further agree that in the absence of an overall view, our constituencies' postal provision tends to be haphazard or lopsided?

Malcolm Bruce: That is exactly right. I do not want to identify individual post offices, but I can say that in the past couple of weeks I have spoken to owners in my area and in Leicester. One said, in effect, "I'm just taking the money because it's on offer." Another said, "I don't want to talk about it because I know that the community is not happy and I'm a bit embarrassed." I said, "You shouldn't be embarrassed, because you're looking after your own interests, which is understandable." However, they still would not discuss it.
	Another owner said, "A year ago, the Post Office asked me to take voluntary closure, and I decided against it because I was happy to carry on with the business even at that level." She told me that her office was then designated a compulsory closure under the Aberdeen closure programme. She asked me not to fight for it, saying, "If you succeed, given the state of the business now I'll have to close it in six or nine months' time anyway because there will be no business left, and there is no virtue in hanging on to a business that is not viable." However, it was viable 12 months ago. A particular difficulty is that 150 child benefit element payments have been reduced to four. She told me, "I don't just lose the payments. When people came into the shop they bought sweets, newspapers and other things; now, they don't come into the shop at all. We've lost the footprint—as has the Post Office, because people are going to other businesses for banking services." Where can the Post Office get that business from once it has lost it? That is a serious point of concern.
	The Post Office's management have ambitious plans. They are bullish about what they can do, and I wish them nothing but joy and success. However, they are moving into a highly competitive area of business where other companies are involved, and we have yet to see how successful they can be. Because of underinvestment, they are having to develop in partnership with private collaborators. Although there is nothing wrong with that in principle, the fact that they have to share the profits to get access to investment reduces the value of the potential benefits involved. In that context, we must recognise that we do not yet have a business plan that delivers results.
	Several hon. Members have been to Leicester, South because of the by-election. When I visited that constituency as my party's spokesman on post offices, I was told that four post offices are threatened with closure—three under the urban renewal programme and one because it is under review. Massive petitions are being signed in the community. People said, "We can assure you that we are using these post offices— sometimes they bulge at the seams and you can't get near the counter because there are so many people coming and going—but we are told the service is no longer required." When I asked them how they felt, they said, "We feel utterly confused, to be honest. These are busy post offices and we use them, but the Post Office, the Government or whoever say they are not necessary." I assure the Minister that that will register when people vote, because they do not understand why it is happening and can see no benefit.
	Another issue is that of the activities of supermarkets that have taken over post offices. It is mentioned in the amendment tabled in my name and that of my hon. Friends. The Post Office contracted for a number of supermarkets to operate post offices in their premises. It seemed like a good idea at the time, but now they tend to say that they can make more money selling beans and would rather not have the post offices. That creates further problems. My information shows that Tesco notified the Post Office of 44 closures after the recent takeover and that Morrisons gave notice of 21 after its takeover of Safeway. That presents genuine difficulties because alternative premises and venues may not be available. The Post Office and the Government have lost control, which was effectively surrendered when the branches were given to the supermarkets. Now that the supermarkets no longer want the branches, there is a huge problem. Who will pay for finding alternative premises? Will the cost be so high that the community will lose the post offices?

John Lyons: The hon. Gentleman makes an important point about Safeway, which has been taken over by Morrisons. Post office closures, which were never threatened under any programme, are now taking place effectively as part of Morrisons' policy. That is happening in my constituency.

Malcolm Bruce: The hon. Gentleman makes a good point. If the Post Office's presumption was that a post office was needed in a locality, it should go through a process that is different from simply asking, "Is someone available who is prepared to take it over?" There should be positive action, with some investment if necessary, to replace the post office in a suitable nearby location. I hope that the Minister will deal with that point.

Russell Brown: I agree with the hon. Gentleman and I know fine well that it appears that Safeway in Dumfries will lose its post office. However, does not that provide a God-given opportunity in Dumfries for the business to be redistributed among the three, possibly four, other sub-post offices within three quarters of a mile of the supermarket site, thereby strengthening their position?

Malcolm Bruce: The hon. Gentleman knows his constituency and his suggestion may be the right answer for it. The decision must be based on local circumstances. If the community accepts it, that is fine. However, I am worried that we are closing so many post offices and it is simply assumed that the business will transfer to neighbouring ones, but that will not happen to all of it. In some cases, the long-term business does not exist, so further closures may be in the offing.

Stephen Timms: The hon. Gentleman is making an important point and I am sure that he, like me, welcomes the assurances from Tesco and Morrisons that they will work closely with Post Office Ltd. when they review their stores that currently accommodate post offices. They will not act precipitately. Only Post Office Ltd. can make a proposal for the permanent removal of a post office. Tesco, Morrisons or any other body cannot make such a proposal; there must be a consultation period in accordance with the code of conduct. I believe that we can work through the issues to which the hon. Gentleman rightly draws attention.

Malcolm Bruce: I hope that that is the case. Unsurprisingly, Tesco has asked to see me tomorrow and perhaps I shall get some further information. I do not make an attack on Tesco and Morrisons; I simply draw attention to a problem that should be properly tackled, not realised by default.
	I am conscious of the time, but I want briefly to refer to Aberdeen, where the situation has given me cause for concern. I wish to make it clear that the city of Aberdeen is not part of my constituency, but one of the sub-post offices, Bankhead, was in the Gordon constituency before the previous boundary changes and should be in that constituency after the next boundary changes. However, that will not happen because it will be closed. There are 14 other post offices in the city of Aberdeen, and I made a point about that in an intervention, to which the Minister did not respond.
	There was a change of administration in the city council last May, when the Liberal Democrats formed an administration with Conservative support. It approached the Post Office early to discuss the possibility of paying council tax through local branches. The Post Office was not prepared even to discuss it, despite the council's indicating that it expected a budget transfer of £100,000 to the small post offices. That is a disturbing attitude by the Post Office. It claims that it is trying to develop business, but when business is on offer it is not even willing to discuss the possibilities.
	The same applies to utility payments and other matters for which the Post Office claims to have an ideal network. I was discussing with a credit card company, which I shall not name, its attitude towards its relationship with the Post Office, and it said, "To us, the Post Office's unique selling point in getting us to use its services is that it has a major network, but it is in the process of destroying it, so why should we bother to engage with it?" That is a serious response from a serious business, and if the Minister does not take it seriously, he is really not in touch with what is happening.
	The post office network has to settle at a viable size that people will be convinced will stay viable. In spite of Ministers' assurances, people working in the Post Office do not believe that that will be the outcome of the current processes. I think that the Minister is genuine in his belief, and honestly confident that business will come, but many people engaged in the process cannot see it coming through at anything like the speed or volume necessary to sustain the network that we will have by, say, the middle of next year.
	I have mentioned my concern about the situation in Scotland. One of the arguments that has been put to me is that part of the revenue stream will come from people carrying out cash transactions on their own bank account through the Post Office. In Scotland, the Royal Bank of Scotland and the Bank of Scotland have refused to co-operate with that scheme, which affects the vast majority of account holders in Scotland. The only other bank of any significance is the Clydesdale bank, which might be having discussions about it—

Martin O'Neill: The TSB?

Malcolm Bruce: Well, the TSB is important, I agree, but the hon. Gentleman knows perfectly well that the Bank of Scotland and the Royal Bank of Scotland play a considerable part, and that, because of the decisions made by those banks, Scottish post offices will be significantly disadvantaged in regard to revenue potential, compared with those in England, yet there is no plan to offset or compensate them for that.
	The contention that my colleagues and I are making is that change is necessary and desirable. However, a lot of what the Government call investment is actually dead money being paid to shrink the network. In reality, the Post Office needs investment to develop new services, and Royal Mail needs investment to compete with the private sector. The Government's business plan does not inspire confidence that either of those two wings of the post office network will be able to make the investment needed, on the scale required and in the time scale that we face, to deliver a viable, profitable future. In those circumstances, the question will continue to be asked as to whether the Government really are in control of Royal Mail and the Post Office.

Martin O'Neill: When I got back last night from a foreign trip with the Trade and Industry Committee and read my Whip, I saw that today's debate was to be on postal services, so I thought that we would be discussing the delivery of letters. However, such is the understandable ambition of a frustrated Opposition Front Bencher that a scattergun approach has been adopted and everything is the subject of attack. I suppose I shall have to revise my notes a little as a result.
	I want to start by discussing the Royal Mail. I welcome a debate on this subject, because it is probably an appropriate time to have a discussion in the House on this issue. The Royal Mail has had a chequered experience in recent months—I use the term "months" rather than "years". Last September, a vote was taken on a strike and, to my surprise, it was won by the management. I had thought that other factors were at work and that the workers would come out.
	I recognise that neither the Post Office nor the postal service is a monolith. It is unfortunate that the hon. Member for Lichfield (Michael Fabricant) either has not read or does not know the work of Tom Sawyer and his consultancy, which introduced some seminal changes into the thinking on industrial relations on both the employer and the trade union side. His analysis of the situation bears repetition today. He identified a number of groups employed in the Post Office. First, there were the people who had been there for many years and who were Royal Mail loyalists. They in turn could be split into two camps. The first consisted of those who were prepared to work for what is really a pittance. If there was a cause for dispute at the time of the ballot, it was the fact that all the people who deliver our mail every day get less than £300 a week. If anyone is telling me that people should get paid less than 15 grand a year for doing work of that nature, that is a disgrace. We cannot run a high-quality service on low-paid workers.
	A number of people formed their view on the basis that they had been at the Post Office a long time. I do not have the exact figures and they vary across the country, but in my constituency a job with Royal Mail, as it is now called, is perceived as a good job. It is regular employment and it has an index-linked pension at the end of it. A number of people who entered into that ballot took the view, "We don't get very well paid, but we're getting near retirement so we don't want to rock the boat and we certainly want to retain an index-linked pension." It is to the credit of the management that they expressed in the evidence that they gave to us recently a continuing commitment to the index-linked pension, which has to be there as a reward for people who for too long have been too lowly paid.
	Historically, some people who joined the Post Office came from the services. One problem that we have had with the Post Office, which was identified by Sawyer, is the fact that the management structure has, on occasion, been militaristic, multi-layered and authoritarian. It has not been conducive to changes in working practices—which takes us on to the second group. These people may not like the pay and may be more recalcitrant, but they nevertheless have a loyalty to the concept of public service as expressed in the delivery of mail. They were, in large measure, the ones who were fed up and last year voted for strike action. However, the negative vote meant that it did not take place. None the less, some of those people took strike action.
	There is a third element, which is most pronounced in the big cities—the people who are part of the churn. They work at Royal Mail for a relatively short period and, frankly, are not interested in the long game. They are certainly not the kind of people who by and large want to go out on strike, because they are happy to take what they can get for as long as they need it and then move on to another job. Some have been unemployed while others have left a job to go to Royal Mail. They see it as a pathway to other areas of employment.
	So the labour force are not monolithic, but the people who work at Royal Mail are highly committed to a concept of service. One management shortcoming was that, before the ballot, they were unable to sell the changes in work practices. It is fair to say that the person who has fought hardest for the single delivery is the general secretary of the union, Billy Hayes. Billy has argued consistently that a system that accounts for 4 per cent. of the mail but, as the Minister said, 20 per cent. of the costs is an unreasonable burden to place on his members.
	I merely ask whether anyone on the Opposition Benches—their numbers are more depleted than once they were, although I realise that the shadow Minister, the hon. Member for Lichfield, had a captive audience; they were agog at his oratory while mere mortals such as me have to put up with a far lower turnout—is prepared to defend a system that accounts for such a large part of the costs while being responsible for such a small part of the delivery.

Michael Fabricant: I am bitterly disappointed that, despite my oratory, the Chairman of the Trade and Industry Committee cannot remember what I said. I made it very clear that we think there should be only one delivery, for all the reasons to which he has already referred. Does he not accept the point made by Conservative Members—and, indeed, by Labour Members in previous debates—that it is unacceptable for the single delivery to happen at inconsistent times day by day so that businesses and individuals just do not know when it will be made? When deliveries are made so late, that delays the first class post by, in effect, a further 24 hours.

Martin O'Neill: The hon. Gentleman makes a couple of points with which I would not altogether disagree. On occasions, the service has been highly variable. My understanding is that it is beginning to bed down and the obvious excesses are now being removed. We must also recognise that not only do most other countries have just one delivery but few have the standards of delivery—even the ones that we fail to achieve—that we must currently put up with. It takes a lot longer for mail to be delivered in most of Europe, and that is certainly not matched in the United States.
	Were we to have a regular system of delivery, whereby everything that could be delivered was delivered by 1.30, there would probably be an awful lot of mail turning up the next day. There would be a knock-on effect. As we are talking about trying to find a means of reducing costs, one of the major contributors to which is the removal of the second service, we must recognise that there will be differences. Nobody argued that a single delivery would be as good as two; they said that it would be almost as good, and that with other improvements, it could be as good in future.
	To take a different tack, the selling of the one delivery was not well handled by the management. More than any other single issue, the problems that arose after the vote—with a number of areas taking the view that they wanted extra money and that they wanted it right away, for which they went on strike—are responsible for the failure to meet performance standards over the past 12 months.
	Therefore, in the pursuit of cost reduction, the Post Office management have sacrificed service. They have gone for a quick financial fix. They have not done that only by taking out the delivery. There have been the usual things: they have reorganised, got rid of properties, realised assets that have been lying dormant, and got a far better grip on the finances. Across the board, in the public sector, one of the problems is that, provided that an enterprise does not make a profit or does not wash its face in only one year in every four, it is not too closely examined. If we consider British Nuclear Fuels Ltd. and some other public enterprises still in state ownership, we see that the quality of accounting has left a lot to be desired. The Government, as a consequence of their endeavour to have both transparency and accountancy, have been hoist with their own petard because, occasionally, they have brought out the inadequacies of the funding arrangements.
	The Royal Mail left a lot to be desired. There was rigidity in the management and a failure to invest, and on a number of occasions only one target was identified—to make sufficient money to give to the Treasury to satisfy the Government of the day. It is common knowledge that until about two years ago there was no automatic sorting equipment for A4 envelopes. Given the amount of A4 mail that we receive in our mailbags—we could be regarded as small businesses—and given the nature of business in Britain, let us consider how much business mail was unsortable for a long period due simply to the fact that the Royal Mail, the Post Office, or whatever incarnation it was in, lost that opportunity.
	In some respects, the service offered by Royal Mail is not rocket science. We have first class and second class mail, and then there is special delivery. That is all that is offered. For a price, FedEx and the other speedy couriers can deliver packages and letters very quickly.
	Parcelforce has been a problem—some might call it an unmitigated disaster. I would not go as far as that, but I would say that it has been a source of embarrassment to a major international logistics company—for that is what Royal Mail is. It has not been able to organise the delivery of parcels. Equally, it has been extremely cautious and conservative about the range of services it has offered as a mail deliverer. That is one instance in which the old guard of the Post Office must stand condemned, and the problem dates back to before 1997. Successive Governments have demanded far too little from the postal service in terms of product range.
	We are told that none of this really matters because we are moving to the age of the paperless office. That is nonsense. However, one thing that is relevant to the paperless-office argument is the internet. Why was Royal Mail not an internet service provider? Why did it not get in on that act at the outset, and why does it not do so today, when it has at least 16,000 retail outlets online? It could install keyboard facilities and the like, thus providing community access to the internet as well as access for those behind the counter. That is one of many lost opportunities.

Malcolm Bruce: Your Guide was aimed at dealing with the public service side. Surely the Post Office does see this as an opportunity, and intends to take advantage of it. Would not the development of Your Guide have made a contribution?

Martin O'Neill: Let me explain to those who may not be as clued up as the hon. Gentleman that Your Guide was intended to be a community access point. In many respects, it was about simply providing information, and it could be described as a repository of information.
	One reason why I discovered the subject of today's debate so late was that last week I was in the United States looking at, among other things, e-government and interactivity. It is clear that we still have a long way to go. Institutions such as Royal Mail could be far more interactive, not least because we now have a network of post offices online. If we want to increase footfall, we should bear it in mind that many people do not receive benefits and do not currently visit post offices. In fact, they are the majority. There is currently a captive market consisting of clients who receive benefits. Those of us who are not in receipt of benefits rarely go into post offices, because in general we have other means of getting rid of our mail. We only visit them when sending packages or buying stamps, and stamps can be bought in many places now.
	We could meet at least part of the footfall challenge. It may be too late for Royal Mail to become an internet service provider. It could be argued that most ISPs in the United Kingdom with any aspirations to size and critical mass are still quite short of that, and that there are difficulties that we may well have to reap in the future. We should, however, look beyond that and consider issues relating to the delivery of mail and the question of liberalisation. I think it fair to say that the pick-up of mail will continue to be a major responsibility for the Post Office as far as post boxes are concerned. One thing that a lot of our constituents do not really understand is that boxes are opened and emptied only once a day not because the Post Office is out to save money, but because of the scale of the sorting operations that the new equipment requires, which means that it need run only in the evenings to get the sorting done. If the sorting were done during the day, the equipment would be running at only half-cock, so at least part of the pick-up function will remain.
	It is understandable that banks, utilities and local authorities, which all send out monthly bills and statements, might well be attractive customers for Deutsche Post or the Dutch postal service. However, it is interesting to note—no one who has spoken so far has mentioned this—that at the end of last year, Royal Mail entered into an agreement with one of the main private operators on the cost of access to the system, which had been one of the major obstacles to liberalisation. The Post Office is now working with the private sector to deal with some aspects of the pick-up and sorting of mail.
	On sorting, the picture is now a lot better than once it was. In some areas of the country, certain sorting offices had many of the industrial relations problems that I hinted at, such as a recalcitrant work force who were resistant to change and resentful of the financial rewards that they were receiving, and who wanted to make higher pay claims. As a result there were difficulties, but at least to some extent they are now diminishing, although they have not gone away. I would like to think that the difficulties associated with the sorting of mail, which in many respects is the most critical part of the process, will be resolved before too long.
	The last part of the process is of course the last mile delivery. I know from discussions with potential players in a liberalised market that they are not interested in delivering mail. Postman Pat's future is safe and anyone who suggests the contrary is scaremongering in the extreme. It must be made clear that the delivery of mail will remain, as far as I can see, the long-term monopoly of the Post Office, but it will not have a total monopoly. It will be subject to competition, and in some respects the competition will be painful; but I am confident that there is a mood abroad in the Post Office that can accommodate that. Both the trade union and management have shown a willingness to co-operate in this regard.
	I was very critical of the Post Office's approach to the urban reinvention programme, and I remain critical of the amount of time allowed for consultation. Six weeks is too short a period; it probably should have been 12 weeks, as it is for a number of similar exercises. If local government, for instance, wants to do something, 12 weeks are usually given for consultation. One could argue that even 12 weeks is not long enough for some people, but it is probably true that the Post Office's intransigence has helped to stoke some of the fires of resentment. It should consider the issue again.
	It is abundantly clear that Royal Mail is now willing to explain—it will do so if it is given the chance—that there is now a rationale behind the system of closure. There used to be no rationale to the way post offices were opened and developed in the United Kingdom. When the distribution of lottery outlets was conducted, however, Camelot used a map of the UK to identify centres of population, so that nobody would be denied access to the lottery—so that no one should be denied access to being ripped-off once a week if they so desired. In areas where that would have been difficult, Camelot changed the criteria and allowed smaller, less economic outlets the opportunity to sell lottery tickets. The Post Office did not have that luxury. Like the man going to Cork, it would not have started from where it was, but the post office network now has some rationality.
	I accept that mistakes are made, sometimes serious ones, and they are sometimes badly handled—examples have been given today. However, by and large, the process is working reasonably well. As I said earlier in an intervention on the hon. Member for Lichfield, between one in three and one in four of the applications for financial reimbursement for closure have been denied. The argument is that it is Liberty Hall for post offices and if the owners want to close them they can, but that is not so.
	There are even those who argue that the 28-month offer is too generous. Post office owners can not only close the shop but sell a piece of real estate and make a sizeable profit. In the grey areas that are not quite urban and not quite rural, people can acquire nice properties that used to be post offices at a reasonable price. That does not happen in all cases, but the property boom has meant that the price that can be realised for the post office building has been a significant factor. However, that is a risk that we have to take. Besides, we cannot keep people in business who do not want to be there. If people have worked in a post office until they are 65 or have reached an age at which they want to stop, it is not for Royal Mail to tell them to carry on.
	We must also recognise that a post office may not be the kind of business opportunity that a young couple or a couple in early middle age who have retired from other occupations would necessarily find attractive. Franchised businesses are among the most dangerous and unsatisfactory activities for certain people. The Trade and Industry Committee last week took evidence from tenants of tied houses with the new pub companies. In some instances, people have put sizeable amounts of their own money into businesses that did not merit support. The evidence suggests that the average length of tenancy in a public house in such conditions is no more than three years. People have taken up options that were not realistic, and the position is similar for petroleum retailers. People have entered into complicated franchise agreements for gas stations across the country on the basis of poor information and advice. It ill behoves us to assume that a business that has provided a reasonable way of life for some retailers of a bygone generation will provide conditions that are attractive to people today.

Nigel Waterson: The hon. Gentleman makes an important point that the network reinvention programme was oversubscribed—more people wanted to receive compensation than could do so—but does not that undermine the Post Office's claim that once its plan has been carried out in any particular area, there will be no further closures? In reality, if other post offices are operating at the margins, they may go out of business subsequently anyway.

Martin O'Neill: There is a flaw in the hon. Gentleman's logic. If there is a limited amount of business in an area and one of the players is taken out of the equation, the same business is spread between fewer people. If the smaller number still cannot operate, that is another issue. It is fair to say that there are people in the business with artificially low ambitions. We have all been in some pretty appalling post offices. The best are very good—excellent outlets—but some are dreadful. Sometimes, it is as if people in such post offices are doing us a favour by offering services that they are required to provide under their agreement. People expect to be able to shop all day on Saturday, but some post offices close at 12 noon on Saturday. Why? Because they have always shut at 12. That is just one example of apparent indifference.
	It could be argued that such people were not making enough money from the business, but that is why the Government have made £30 million available, through the Post Office, to improve facilities. Some post office counters have closed but the shops have been left open and are being given assistance to tart themselves up—for want of a better expression. The rate of take-up may not be as high as it should be because people are uncertain, as the hon. Member for Eastbourne suggested.
	The process of getting post offices online has been an unsung triumph for the British IT business; it took a long time to get to that point, but it is now remarkably successful. However, we do not yet offer anything like the range of services that we should. When I raised with one of the Scottish banks the fact that it was denying my constituents access, I was told, "You've got to appreciate that the Post Office signed an agreement with Allied Irish Bank, so why should we allow a competitor privileged freedom of access to our customers?"
	The Royal Mail was damned if it did and damned if it didn't. David Mills has done a remarkable job at Post Office Ltd., but the fact that he is able to offer a range of financial services has of necessity put the nose of some of the other banks out of joint. What brought the issue to the table was the failure of the British banking system to take into account small savers and people whose accounts were not particularly active; it penalised them. Now, we have a commitment to a more social banking system. I hope that the financial services regulator will return to the issue and will set up incentives, or perhaps impose penalties if there is a failure to address the social obligations in the banking system. For all their good intentions and warm words, nobody could describe bankers as philanthropists.
	We cannot deal with the issue once and for all; we must return to it. The spread of banking facilities and the integration of banking in the post office system is something that we cannot afford to ignore.
	The Royal Mail had a monopoly in the public sector. Competition and liberalisation are beginning, and with a system of regulation and service obligations, are enabling those of us on the left of politics to see how important financial services can be offered in a socially responsive way throughout the country. The Conservatives are not interested in addressing that challenge. They want privatisation and liberalisation of the Post Office, probably through a more rigorous form of franchising than exists at present. I certainly think we could improve the franchising arrangements but under the Conservatives they would be rather more punitive than the laissez-faire approach that, sadly, the Post Office and its predecessor bodies have adopted.
	The Post Office is still an organisation in transition. We have legislated to create the regulatory system and the system of obligations and to make the Royal Mail independent of Government interference. Of course, the difficulty is that putting something at arm's length from the Government does not protect them from the responsibility of taking the blame for everything that goes wrong. This Government do not need to take too much of the blame.
	I have not spoken this evening about direct payments, cards and the like. I have gone over all that on a number of occasions, and my hon. Friend the Minister knows my views. Good friends though we are, there are some things on which we might well disagree. There is evidence of a small change, even on those issues. The Department for Work and Pensions, which I never find the most sensitive of Departments, was perhaps at least to an extent stung by the criticisms made by my colleagues and me about the way in which the card system was foisted on people, the limited range of choice and the cynical way in which the system was presented.
	There is evidence of a change of tack. Whether the Department has gone as far as we want, or whether it could go as far as we want and still retain the existing system is a different matter, but the Government and the Royal Mail have a sense of the fact that there must be change. The trade union is trying its best to bring its people behind those changes, but none the less there is a feeling—I have some sympathy with it—that a system of mail delivery in the broadest sense should be a national priority and that, given its near monopoly status in that last area, it should remain in public ownership.
	If the Government are true to their word—I like to think that I can believe my colleagues—we will have a publicly owned Royal Mail service that enters into competition and benefits from liberalisation. Before too long—let us hope that this happens in the next 12   months—we will see an improvement in the standards of service, which have been sacrificed because of the need to sort out the Post Office's financial circumstances. I do not justify that, but I understand it. If we can get strong finances, good investment and good industrial relations, we will get the proper kind of service delivery that we want.
	We may not hit all 15 targets next year—there is more than an even chance of doing so—but I hope that the four targets that the board members and senior management depend on for their bonuses will be regarded as a priority. If they are not regarded as a priority and they are not met, I hope that we will consider extending the criteria on which those bonuses are paid. Financial hanging very often concentrates the mind. That need not be done at the moment because I am confident that Allan Leighton, Adam Crozier and their colleagues barely need to be told what their responsibilities are. That is one of the jobs of government, and I am confident that my right hon. Friends are making it quite clear that we will not stand for an inadequate postal service and an inadequate Royal Mail, which should be a source of pride as a British institution, but was in danger of becoming a source of embarrassment. We have just avoided that, but there is still some way to go before it is the kind of institution in which the public sector and the public at large can take pride and satisfaction.

Simon Burns: I am sure that, for a variety of reasons, it will come as a considerable relief to the House that I do not expect to speak for very long, particularly given that, for almost two and a half hours of this three-and-a-half hour debate, we have only heard speeches from those on the Front Benches and the Chairman of the Select Committee on Trade and Industry. No Back Bencher with constituency interests has had an opportunity to speak, and it does not look as though other hon. Members will have much opportunity to do so.
	I am particularly pleased that we are holding this debate today because, as a number of my hon. Friends and other hon. Members have said, we all face serious constituency problems that particularly centre on the closure of urban sub-post offices and the poor delivery of mail. I listened with interest, then incredulity, and then concern to the Minister's speech. As always, it was delivered courteously, as is typical of this Minister, but I simply could not believe that he believed some of the mantras that he kept repeating. There is a saying that, if something is repeated often enough, people will come to believe it. For a Minister, seven years after the Government came to power, to rest his case and his failings primarily on the previous Government rather beggars belief. There comes a time when even this Government must start to accept responsibility for the action or the inaction that they have taken over the past seven years.
	On the Royal Mail's record, the Minister told us—I assume that he believed it because he kept repeating it—that the Royal Mail had turned around and that everything was getting better. On the narrow point of the Royal Mail's profits and losses, yes, the Minister is right, but it seems rather odd that he thinks that the whole thing has been turned around and is beginning to perform wonderfully, given that the Royal Mail missed four targets in 2001–02, missed 12 in 2002–03, and went for the jackpot last year and missed all 15. I do not think that that shows that the improvements are coming and that everything is getting better. It seems to me that, once again, given the increasing failure to meet the targets—year in, year out—the Royal Mail is getting worse in the service that it is meant to deliver to the public.
	At the same time, just to add insult to injury, the poor punters—those who post the letters—must pay more. The price of the first-class post went up in 2003 and that of the second-class post went up in April this year, to make more money for Royal Mail, to help it to offset its losses, but without any improved service. On balance, there is probably good reason for the withdrawal of the second delivery, but the first class post should now be delivered in urban areas by lunchtime. The trouble is that no one has defined what lunchtime actually means. To Americans, it is 11.30 in the morning. To others, it may be 12.30 or 1 o'clock. What does lunchtime mean? Is it so wonderful a target for the Royal Mail to perform against?
	We as hon. Members probably send and receive more mail than most individuals, so we have first-hand experience that allows us to monitor what is happening. Sadly, despite the great improvement that the Minister keeps talking about, Chelmsford does not enjoy a good mail service. In fact, the service is so appalling that, if I hold a surgery in Chelmsford on a Friday afternoon and I manage to complete my dictation before the sub-post office in my area closes, I am provided with a free special delivery service from Chelmsford to the House of Commons—that service is usually provided the other way around—to try to guarantee that my dictated surgery notes get to my secretary on a Monday morning. If I post them first class on a Friday night in Chelmsford—only 35 miles up the road—invariably, they do not turn up until the Tuesday. Given that we are paying through the nose for the service, it seems disgraceful that something cannot be delivered a mere 35 miles away three days later. So the authorities have kindly given me that special service, which seems to work. The post generally turns up by lunchtime on a Monday. I should have thought that it could turn up by 8 o'clock in the morning, but that is asking too much.
	Why does Chelmsford have such an appalling service? Many of my constituents, as well as me, would dearly love to know. The target is for 90.5 per cent. of all post to be delivered by the next day, but the figure in Chelmsford last year was 85.8 per cent. The CM postcode area is the ninth worst in the whole country. At least 92.5 per cent. of letters posted in the CM area for delivery in that area are supposed to be delivered by the next day, but the figure is sadly only 89.9 per cent. It is especially disturbing that the figures are worse now than they were last year, despite the fact the Minister seems to think that everything has turned around and the Royal Mail is getting better. No one is confident that they will receive their mail by the time the Royal Mail promises that it will be delivered, and my constituents are disgusted by that situation, as am I.
	On top of that problem, we, too, have experienced the closure of a series of urban sub-post offices over the past 18 months. Seven have closed down, two of them in probably the most deprived ward of my constituency. To return to a point mentioned by my right hon. Friend the Member for South-West Norfolk (Mrs. Shephard) when she intervened on my hon. Friend the Member for Lichfield (Michael Fabricant), a disproportionate number of people in that area are elderly and do not have cars, so they might find it difficult to go further afield to the sub-post office that they must now visit, following the closures. Young mothers with children, but probably without vehicles, must now also walk further.
	There was considerable concern about all the closures, so several people wanted to try to do something about them. They took at face value the Post Office's mantra that there would be a consultation process during which all views could be invited, given, listened to and considered. Action groups were set up and petitions were distributed. I met representatives of the Royal Mail to discuss the closures. They were courteous—I have no complaint about that. They sagely nodded as I made my points, as did my constituents and Chelmsford borough council, and ooh-ed and ah-ed at the appropriate points during the discussion. However—did they do anything? They did not do a single thing; all the sub-post offices closed as soon as the statutory time scale for consultation expired.
	It is all right for the Minister to say that the Post Office listens, and to produce the odd statistic to back up the fact that it cares and takes account of cases made for keeping post offices, but certainly in West Chelmsford and, if the hon. Member for Leicester, East (Keith Vaz) is to be believed, in Leicester, we find that it listens and goes through the motions, but does not pay one iota of attention to what is said or the case that is made. It closes the post offices because it wants to eliminate its losses and get back into profit.
	I might be cynical, but it is perhaps a strange coincidence that few complaints are heard from sub-postmasters about the closure of their sub-post offices. If people's businesses are to be closed down by another body, they are usually the first to lead the battle to try to save them. Sub-postmasters do not do that because, as my hon. Friend the Member for Lichfield said, they   are being bought off with extremely generous compensation.

Nigel Waterson: When we went through the process in Eastbourne, my petition was displayed in shops, shopping centres and other places throughout the constituency and it ultimately attracted thousands of signatures. However, the places in which copies of my petition were not welcome were the sub-post offices slated for closure.

Simon Burns: My hon. Friend makes a good point. All too often, sub-postmasters and mistresses have been content for their businesses to close because they have been bought off by advantageous financial packages. I do not begrudge the payment of compensation if a business is closed down, but "compensation plus" is being paid to try to silence the opposition of the people who one would think would be most directly affected by the closure of the businesses. They have been reassured by the amount of money made available to them.
	Notwithstanding the case that the Minister made, I join the hon. Member for Leicester, East in saying that the consultation process is a farce and that it does not work. The Post Office does not want it to work because it is determined to close the sub-post offices that it has identified for closure. That is the experience in Chelmsford and, according to the hon. Member for Leicester, East, in Leicester, although it might not be the experience everywhere. We know that a decision to close some 50 sub-post offices was reversed, but do not know their location. Given where we are in the electoral cycle, they may well be in marginal Labour constituencies. If the Under-Secretary of State for Work and Pensions, the hon. Member for Gravesham (Mr. Pond), were to let us know their locations, we would be able to form our judgment on whether that is the case. They could be in Sedgefield or Hull—

Nigel Waterson: Or Leicester.

Simon Burns: Leicester is an interesting case. Despite the Minister's rosy words about the consideration given to the situation in Leicester, I bet my bottom dollar that the sub-post offices will either be saved on about 12 July, or closed on 16 July—certainly not before that. I cannot predict which of those two scenarios will occur, but if they are to be closed, there will be no announcement until 16 July at the earliest.
	There is great concern and growing cynicism in my constituency not only about the poor delivery of mail, for which people must pay more because of price increases, but about the elimination and closure of valuable, badly needed urban sub-post offices, especially those in the socially deprived area in the west of the town—as far as that can be defined in Chelmsford.
	I give a warning to the Under-Secretary. For reasons that will become apparent, especially to the hon. Member for Guildford (Sue Doughty), we get a perverse consolation from the situation. Not even this Government can get everything right. They made the mistake of announcing the first two closures in the west of Chelmsford four months before the local elections in May last year. It might surprise the Under-Secretary to hear that Labour councillors are few and far between in Chelmsford—we did not have any during the ten years up until 1995. We had five up until May last year. Three of them were in the ward in which the sub-post offices were located, but sadly for the Under-Secretary, they all unexpectedly lost their seats. When I spoke to Labour activists after the election, all that they could say was, "The war in Iraq, and those bloody post office closures that the Government inflicted on us." Let that be a warning, because people care about their sub-post offices and want a local service on their doorsteps. If the Government do not listen to public opinion, it is amazing what can happen to councillors and Members of Parliament.

Russell Brown: I apologise to the hon. Member for Lichfield (Michael Fabricant) for missing his opening contribution because I was delayed before the start of the debate. From what my hon. Friend the Member for Ochil (Mr. O'Neill) said, he made an excellent speech—at least that was what I picked up.
	On the back of an extremely lengthy and difficult period, postal services and deliveries are beginning to bed down, to put it in the terms used by my hon. Friend the Member for Ochil. I honestly believe—I have spoken to colleagues who have witnessed it personally—that single delivery is beginning to show some positives, although we are not out of the woods by any manner of means. I agree with those who have said in this debate that the Post Office's quick financial fixes are not necessarily the answer to the significant difficulties faced by a public service that we all hold close to our hearts and in deep affection, but sentimentality cannot and will not win the day.
	Like colleagues on both sides of the House, I have witnessed some closures of rural post offices in my constituency. It is very difficult when the business of a small shop, which has been the home for the village post office and which serves perhaps only four or five dozen houses, starts to decline—not because people do not want to use the facility, but because a greater choice has developed over many years, and they have access to the main town that is 5 or 6 miles away. We have all witnessed that. It is never easy to turn such decline around. Sentimentality for a local village post office will not sustain the service for many years to come; we must be honest with ourselves.
	The hon. Member for Gordon (Malcolm Bruce), who has left the Chamber, passed comment on the Postwatch estimate of 250 post offices that need not and should not have closed. That is worrying. The situation should never have arisen, but it is unlikely to be reversed.
	The hon. Gentleman also commented on supermarkets. I intervened on him and referred to the proposed closure of the post office in the Safeway supermarket in Dumfries. I want to be perfectly open and honest about this: I was serving on the planning committee of the council when Safeway applied to develop its site and talked of the potential for a post office in the supermarket. I objected to that at the time because I did not think that it was right. However, permission was granted and the post office came into being, and now Morrisons, which has taken over such sites, has decided to give up the franchise.
	Some say that we should be manning the barricades and fighting for the retention of the post office in the supermarket, if not run by the company, then run by someone else. The last thing that we need is a knee-jerk reaction. That was the very point that I was making to the hon. Gentleman. Within three quarters of a mile to a mile of that supermarket site, there are three or four sub-post offices. We need to consider how those businesses are running and whether there is potential to divvy up among them some of the services currently offered by the supermarket post office, such as foreign currency exchange, the issuing of vehicle excise licences, the all-international parcel service and a lottery payout facility. There should be some sincere thought about that and some answers from the Post Office. I have written to the chief executive to ask him what the plans are and whether there can be some open consultation.
	Debates on postal services and post offices always come round to the argument about the move to direct payments for pensions and benefits and the Post Office card account. It is argued that if all those with a pension book or a benefits book—whether incapacity benefit or child benefit—moved to a Post Office card account, everything would be rosy. That is clearly not so. In many debates in the House and in Westminster Hall we have heard of the difficulties that people have had in securing a Post Office card account. I believe that the decision to move to direct payments was the correct one, if for no other reason than its potential for limiting fraud and other criminal activities, especially robbery and theft from pensioners. The system is far safer if used correctly.
	The Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Gravesham (Mr. Pond), and I have been in correspondence about the card account. He has also been in correspondence with one of my constituents, a gentleman from Dumfries and Galloway elderly forum who believes that it is not the correct system. My constituent looks at the matter from the narrow perspective that there is every likelihood that, after full investigation, someone who reports the loss or theft of their payment book and counterfoils in adequate time would not be penalised financially. However, lying behind the new seemingly failsafe system that cannot be tampered or interfered with, and on the back of the banking code of practice, is a £50 penalty for someone who loses their card on which a transaction is subsequently made.
	We might say that, if someone loses their card or it is stolen, there is little likelihood of someone having the pin number. On Friday evening, a sincere and genuine couple came to my surgery and, to all intents and purposes, pleaded with me to visit their sub-post office in Dumfries to see pension day in operation. Elderly people are handing over their card then going into their purse or diary and reading out their pin number. That is breaking the contract, but we are talking about elderly people who—I say this with the greatest respect; I sincerely hope to be elderly myself one day—do not on occasions understand what is going on around them, or realise who is standing behind them and listening. There is therefore great potential for an apparently failsafe system becoming open and vulnerable.

Michael Fabricant: The hon. Gentleman is raising a fascinating point, which I am following with great interest. He mentions the security of what is in effect chip and pin. Is he aware that only this week a major bank said that we should be using automated teller machines less frequently, not because people might see the pin number entered, but because the machines might have been tampered with and be making a record of the numbers punched in? He is absolutely right to say that nothing is infallibly safe.

Russell Brown: I thank the hon. Gentleman for his intervention. I shall not name the bank involved, because I am not sponsored by it and should not advertise for it, but I am aware of that point. The issue of ATMs immediately sprang to mind when considering the card account.
	The couple whom I was talking about told me about the deep anxiety, distress and sleepless nights that the direct payment system is causing elderly people, many of whom are worried to the point of becoming ill. They even told me about one elderly lady who was having great difficulty in changing to a Post Office card account. She ended up unwell, and spoke to her son on the telephone about the problem. He came up to try to assist in submitting her name for a Post Office card account. We would all agree that that is a decent thing for any son or daughter to do, but he lives down south and made a 400 or 500-mile round trip to a constituency just over the border to carry out a simple transaction, even though his mother did her very best to speak to someone at a call centre to try to make them understand her difficulties.
	The change also poses difficulties for the home carer service, although I have no figures to illustrate this. In my area—I know this is the case in other constituencies—home carers have taken their client's pension book to the post office and collected their pension for them. However, a clear policy has been established whereby home carers' employers—in most cases, the local authority—are not prepared to allow their staff members to use a card and PIN number to access something which, to all intents and purposes, is a bank account. I am delighted that the Department has decided to introduce cheque payments in October for people who find it extremely difficult to use the direct payment system. Many people will be relieved by that concession, although I appreciate that it will apply only to people who have difficulties with direct payments. Last week, the local Pension Service in Motherwell told me that in the past couple of weeks a direct payment team has been set up to look at the difficulties that individuals are experiencing and consider whether there is a specific problem. I applaud my hon. Friend the Minister, his team and the Pension Service for taking that step.
	The other evening, the sub-postmaster and his wife made it abundantly clear that we are where we are and that the decision is not going to be reversed. They were glad, however, that progress has been made in looking at the problems. While someone's age should never determine whether they are fit enough to cope with the change, they suggested that the Department should have introduced direct payments for everyone below, for example, 75. That does not mean, however, that everyone under 75 can cope with the new system. People over 75 with a pension or benefit book should be allowed to continue to use it until they are no longer in receipt of benefit because of what eventually overtakes us all.
	I do not know whether the Minister will consider that a helpful change to the system, but the direct payment system is causing people more than just a little worry. It is causing them deep anxiety and, as I said, they are becoming physically ill. It was right to introduce a safer method of payment that should have benefited everyone. Regrettably, however, it has become a vulnerable system for some people in our society because of the way in which they conduct their business. I therefore hope that my hon. Friend will address people's deep concerns about the Post Office card account when he sums up the debate.

Mark Francois: I am pleased to speak in this important debate, which has a bearing on the lives of all our constituents. I have spoken before about Post Office closures in my constituency and I do not intend to repeat my argument today, other than to say that I am extremely dissatisfied with the way in which the process has been handled. I remain convinced that the so-called "consultation process" on closures, even in its amended form, is little more than a sham. I shall concentrate instead on the failures in the Royal Mail's delivery network. I have raised the issue in business questions, both before and after the Whitsun recess, and am pleased to have the opportunity to debate the matter in greater detail today.
	The changeover to the single delivery system has clearly not been a success. In May 2004, Royal Mail admitted that it had not met any of its 15 delivery targets in the year to March, and had failed to achieve its core objectives on the minimum delivery targets for first and second class post. In the year to March 2004, 90.1 per cent. of first class mail was delivered the next day, compared with a target of 92.5 per cent; 97.8 per cent. of second class mail was delivered on time, as opposed to a target of 98.5 per cent. In addition, while some first class mail may technically be delivered the next day, it now arrives so late that it is difficult to take practical action on it in normal working hours. In effect, traditional first class post has been virtually abolished, and in many areas the time of delivery is largely a matter of pot luck, regardless of the class of postage.
	Anyone who thought that these problems were exaggerated needed only to watch the recent "Panorama" programme to be disabused of that notion. The BBC painted a truly shocking picture of life at a major London sorting office, with poor or indifferent management, sometimes militant staff and generally very low morale at all ranks. Royal Mail attempted to cope with changes in its system by recruiting large numbers of temporary staff, some of whom, to be frank, had difficulty reading and writing and finding even the most obvious addresses, leading to one near-farcical scene that was secretly filmed in a block of flats. Mail was frequently abandoned in delivery rounds or lost at the sorting depot. The worst cases exposed by the programme were of systematic fraud and theft, and it secretly filmed some members of organised gangs—not ordinary postal workers, I hasten to add—infiltrating the delivery network to steal high-value items such as credit cards and cheque books.
	Some of those problems have been replicated in other parts of the country, including my own county of Essex, where the changeover was rolled out in the first half of 2004. Those problems were amply demonstrated by my hon. Friend the Member for West Chelmsford (Mr. Burns), and I should like to expand the argument with examples from my constituency and neighbouring areas, many of which are similar to the problems in London highlighted by "Panorama".
	In the spring of 2004 a young female reporter from the Evening Echo, Anita Patterson, went undercover and took a job as a temporary postal worker for Royal Mail. She was based at the Basildon sorting office for about a week, although the experiences that she described are indicative of problems across south Essex, including my own constituency. She described the situation on the ground in a major article entitled, "We expose mail chaos"—I have brought it for the Minister to see, in case he thinks I am exaggerating—and her account is extremely depressing.
	The changeover led to a large backlog of undelivered mail. At one stage more than half a million items were piled up at the Basildon sorting office awaiting delivery—a fantastic number of items waiting to go out. In addition, a large number of experienced postmen who knew their rounds well began leaving, with large numbers of inexperienced casual staff desperately being recruited to try to fill the gap. At one stage there were more than 40 casuals operating from the Basildon office alone. While some of the newcomers were reportedly keen and wanted to do their best, they often did not know the areas in question and had to work from maps, so deliveries took much longer than when undertaken by experienced personnel with good local knowledge, who knew exactly where they were going.
	Many of the individual delivery rounds had been significantly expanded as part of the changeover process, so that customers at the back end of a round, so to speak, were receiving their mail very late in the day, with many letters and parcels not being delivered until the early evening. One Royal Mail manager quoted in the subsequent Evening Echo report stated that the previous system had run like clockwork compared with the new system, which he described as "a bloody mess".
	Even brief hindsight reveals that the exercise was badly planned. The entire process should have been much more thoroughly prepared for and the subsequent execution of the changeover should have been much better thought through. The staffing implications of the change were obviously not considered properly, and neither were the potential impact on morale and the related impact on the retention or otherwise of experienced staff. The dramatic alteration in the well established delivery rounds persuaded many experienced postmen to leave, which had a detrimental effect on those who were left. It also meant that more casuals were employed, and they had to work harder to make up. The system became a vicious circle. Royal Mail appears to have had scant regard for the effect on its customers, who were effectively taken for granted throughout the process, and in many parts of Essex still are.
	I shall conclude, as I know there is one other hon. Member who is anxious to speak and I want to give him his chance. I, for one, have little remaining confidence in the senior management of Royal Mail. From the people who brought us Consignia and then the post office closure programme, we now have a service that cannot even deliver letters properly and that sets 15 performance targets and then proceeds to miss every single one of them. If anybody ever wants to organise a party in a brewery, I suggest they do not go and ask the management of Royal Mail how to do it.
	The Government cannot escape responsibility in the matter. It is important to remember, as was pointed out by my hon. Friend the Member for Lichfield (Michael Fabricant) at the start of his speech from the Front Bench, that it is the Government who ultimately own the Post Office and Royal Mail. However they try to spin it—I admit that in opening the debate for the Government, the Minister valiantly tried—these problems have occurred on their watch. They are ultimately responsible for the chaos on the ground. The buck therefore stops with Ministers. They need to take a firm grip on the situation and do something about it, or get out of the way and allow others to do so who are more confident to perform.

Michael Weir: I was intrigued by the Minister's description of the reinvention programme in his opening remarks. I am sure that if it worked in the way that the Minister set out for us, it would indeed be a wonderful thing, but in my experience the reinvention programme is neither consistent nor systematic. Despite the promises that we received in the Minister's statement earlier in the year, I can see no practical difference between the consultation process undertaken now and that which was undertaken before, apart from the fact that we now get a letter from the Post Office with a printout and lovely coloured maps. The process is as bad as it ever was.
	Let me give an example. Just before the Minister's statement, the Post Office announced that it was changing the way in which consultation was carried out. There was no longer to be a piecemeal process, post office by post office; it would look at a constituency as a whole. I was intrigued by that and wondered how it would be done in a rural constituency, but I hoped there might be a systematic examination of post office provision. A few days later I got a letter saying that one of the post offices in my constituency was closing. I asked what had happened to the constituency-wide appraisal, and was told that that had not started yet. That post office duly closed, despite widespread local opposition.
	In April I received a wonderful letter from the Post Office giving me the grandly titled Post Office area plan for Angus. As I said, it was accompanied by a nice printout and brightly coloured maps. What it lacked was any sort of strategic thinking about the post office provision needed in a constituency such as mine. I shall give an example of the level of strategic thinking that it contains. As part of the customer profile for one of the post offices, it states:
	"Most business comes from the local authority housing behind the office"
	and
	"the majority of customers are elderly".
	So where were those mainly elderly customers to go? They were expected to go to another post office that is just under a mile away. So far, so good, but how are those mainly elderly customers supposed to get there, as many do not have their own transport? Under the heading "Bus routes", the same wonderful printout states:
	"There are no direct services available".
	In other words, customers cannot get to the alternative post office by bus, and in any event it is situated on a busy road adjacent to traffic lights where there is often a heavy build-up of traffic.
	I approached the Post Office with the concerns expressed to me by my constituents and I made observations to the company regarding that closure and the difficulties with bus transport to alternative offices. The response was that buses are a matter for the bus company. So much for consultation. Surely it is a matter for the Post Office, which is—or at least used to be—a public service.
	The consultation process is seriously flawed and is no more than window-dressing for decisions that have already been made. The motion, for obvious reasons, specifically mentions post offices in Leicester and Birmingham. As someone who has no intention of going to south Leicester or Birmingham, I can say that it affects all parts of the United Kingdom, including my constituency. Will the Minister please tell us the strategic thinking behind the post office reinvention programme?
	Under the latest proposals there are to be three closures in Angus—one in Montrose, one in Arbroath and one in Forfar. The result is that there would be one post office left in the town of Montrose, no post offices in the west side of Arbroath, the largest town in the county, and in Forfar, the county town, two post offices close together, with nothing for the majority of the town. We were told again by the Minister today that the programme is meant to stabilise and modernise the provision of postal services. Instead, it seems to be completely haphazard and dependent on which sub-postmasters want to or can be persuaded to retire. All too often it seems as though the management approach local postmasters, saying, "We've a tub of money. Who wants to go?"
	Surely the proper way to deal with the matter, as the Minister told us, although it is not what is happening in practice, is that there should be a genuine look at the entire area—constituency, local authority or whatever—mapping out the post offices required properly to serve the needs of the population. In my constituency that is not happening. We have a haphazard and unbalanced system, and I am sure that that is the experience of many other hon. Members.
	As I mentioned in an intervention on the Minister, despite the fact that he said there should be a post office within a mile of where people live, the Post Office says that under its agreement with the regulator there should be a post office within three miles. As I pointed out, in any small or medium-sized town that could easily be achieved by having one sub-post office in the centre of the town. It occurs to me that the real strategy behind the reinvention programme might be to cut down the number to one in each town. This is a matter of real importance, as the programme has been funded entirely by taxpayers' money. In effect, we are paying for the reduction in our own services, and no one believes that the current round will be the last.
	The situation is worse than that. When the Post Office proposed the closures, I asked it what would happen if we found someone who was willing to take over a post office at which the current postmaster wanted to leave or could not make a living. I received this response:
	"I'm sure you appreciate that as we are still in public consultation, we cannot explore this suggestion any further until a decision is made, and obviously only then if the decision is taken for the branch to remain in the network."
	So the Post Office will not look at an alternative for a post office until it decides whether it wants to close it. That does not fill me with confidence that it will look seriously at alternatives.
	Mention has been made of the rural post office network, but time is running short so I shall not speak about it in any great detail. Obviously there are serious things to come, and we expect many closures when the money runs out in 2006.
	I shall stop there, as I am being signalled that time is indeed short, but I have serious concerns about this whole process.

Nigel Waterson: This has been a very useful debate, and it has given us an opportunity to highlight problems with post offices in Leicester, South, Birmingham, Hodge Hill and across the country. It is perhaps depressingly reassuring that the problems described by the hon. Member for Angus (Mr. Weir) are exactly the same as those that we have encountered in Eastbourne, on the south coast.
	The facts about the Post Office are dismal and incontestable. In total, there have been more than 1,200 closures under the so-called urban reinvention scheme. On that basis, I suppose that the blitz could have been called the urban reinvention scheme in its day. We have heard about the problems in terms of rural closures, particularly from the hon. Member for Gordon (Malcolm Bruce). We believe that something might happen after 2006, but the Government do not quite know what.
	We have also heard about the failure to meet targets. Four targets were missed in 2001–02 and 12 were missed in 2002–03, and there was a spectacular failure to hit any of the 15 targets for last year. As the Postwatch press release said,
	"there are no longer any more targets to miss."
	My hon. Friend the Member for Rayleigh (Mr. Francois) graphically described the effect of missing those targets on real people in his constituency. We have also heard about the senior management and in particular about Mr. Adam Crozier, formerly of the Football Association. His apparent inability to get the ball into the back of the net makes him the David Beckham of the postal world.
	In the short time that is available, I want to concentrate on the way in which those problems affect the most vulnerable in our society—the elderly and the disabled. Closures are obviously a problem for them, and I also want to mention direct payments, the botched introduction of PIN pads and the exceptions service.
	We have heard about closure numbers, but each statistic conceals a real problem for a real community—a community that will be that bit poorer because its local post office has closed. In my constituency, which was one of the first to be subjected to the area plan approach, five post offices were closed, including the main post office. The word "flawed" is one whose application to the so-called consultation I would entirely endorse. As far as I am concerned, the entire process was a complete farce from start to finish. Despite hundreds of letters, thousands of signatures on petitions and a well-attended public meeting in my local town hall, none of what was said made any difference at all. The process was wholly bogus. Indeed, it is so clear that that is the case that no less a person than the Minister for Energy, E-Commerce and Postal Services had to issue not a three, five or 10-point action plan on consultation, but a 12-point plan, closing the stable door firmly after the horse was long gone. Touching on what my hon. Friend the Member for West Chelmsford (Mr. Burns) said about closures, all too often the Government have stuffed sub-postmasters' mouths with gold and gone ahead and closed their offices anyway on that basis.
	On direct payment, there are, in theory, three options for customers. What the Government have tried to do from the start, however, is have an extremely uneven playing field in terms of the Post Office card account. Indeed, at an early stage, when I was doing the same Front-Bench job as my hon. Friend the Member for Lichfield (Michael Fabricant), it emerged from a leaked civil servant document that the phrase "actively managed choice" was being used. That was the way in which the Government and the Post Office were trying to bully older people into going for a particular one of the options.
	We have heard about the seven, eight or maybe even 20-stage process that is needed simply to open a Post Office card account. With the massive understatement for which the Post Office is quite well known, it said in its briefing for this debate:
	"It does appear, however, that customers are being slower than expected to complete the conversion journey and start using their new accounts."
	I wonder why. Let me give the example of a lady from Southampton who wrote to me. I received her letter only today in my role as a shadow Minister. She says:
	"This month, I received my Post Office Card . . . At a swift count I have made three telephone calls, received four pamphlets, two forms, three notifications, seven letters, one post Office Card and one Proof of Receipt (2 sides A4) from Preston, Warrington and Chester with envelopes marked for non-delivery from Liverpool, Preston and Belfast."
	She first applied on 20 December last year. No wonder Age Concern has said:
	"We are concerned at the considerable hurdles that seem to be being put in the way of opening a POCA. One cannot simply go to a post office and open an account."
	Citizens Advice and the National Consumer Council have expressed similar concerns. The National Federation of Sub-Postmasters says:
	"It is very clear that the Government prefers people to access their benefit payments through a bank account than via the Post Office card account."
	The exceptions service is designed to help people who are elderly, disabled or housebound and need a special service after the new arrangements are finally in place. We are told—I hope that the Minister will confirm this—that the full details are expected to be in place by October this year. We are told that cheque payments will start in October, and that until that time, affected customers will continue to use their order books. It would be interesting to know what projections the Department is making as to the number of people who will take up the option, although Ministers are, of course, keen to make it clear that it is not an option. With his usual ability to calm people's fears, the Minister for Pensions said:
	"The advice to people at the moment is do not panic."
	I have to say that that is not quite the advice that people were seeking. The Select Committee on Trade and Industry had this to say:
	"It is clear from the evidence presented to us that the failure of the DWP to develop its ideas for the Exceptions Service in advance of the introduction of Direct Payments has led to uncertainty and confusion over the means by which some groups of disabled people will receive their benefits in future."
	It is also clear that there was a failure to listen in advance to advice from organisations such as the Royal National Institute of the Blind about the design of the PIN pads, which have had to be redesigned. The hon. Member for Dumfries (Mr. Brown) made some very pertinent comments about that issue and about security in general. An apology was eventually prompted from the Secretary of State for Trade and Industry, who said:
	"I agree that it would have been better if the original PIN pad had been designed with full regard to the needs of people with different disabilities."—[Official Report, 24 March 2004; Vol. 419, c. 910.]
	Finally, it seems to me that there is an enormous paradox at the heart of the policy of both the Government and the Post Office senior management. On the one hand, they want to streamline and modernise the Post Office, restore profitability and extend the range of services. Indeed, the hon. Member for Ochil (Mr. O'Neill), the Chairman of the Trade and Industry Committee, dealt in some detail with the issue of why the Post Office had been so slow to look at other services that it could be selling and at issues such as e-mail, which it could have been getting into at an early stage.
	The Post Office wants to extend its range of services and invest £125 million in a link-up with the Bank of Ireland to provide financial services. That is fine and good, but paradoxically it is shutting the very retail outlets that would help it to sell those new services, alienating existing and previously loyal customers and making life exceptionally difficult for elderly, vulnerable or disabled people, by adding to their worries. In no other area of Government is the gap between spin and reality so painfully wide; I urge my hon. Friends to support the motion.

Chris Pond: This is the third Opposition day debate on post offices this year. If as much concern and energy had been invested in the post office network when Conservative Members were in a position to do something about it, 3,670 post offices might not have closed during their term in office. No Conservative Back Benchers were present in the Chamber—let alone contributed—for much of their own Opposition day debate.
	The hon. Member for Lichfield (Michael Fabricant) opened the debate by generously accepting that the Government care about the vulnerable, the elderly and small businesses that run local post offices. I confirm that we care, which is why we are investing £2 billion in the post office network, and why we are spending £10 billion a year more on pensioner incomes.
	People listening to this debate will find it hard to resist the suspicion that the Conservative party's newly discovered concern for post offices in Leicester, South and Birmingham, Hodge Hill is nothing but opportunism. [Interruption.] "Absolutely" says the Conservative Whip. The Government believe that the post office network is essential to local communities, whether they are in Leicester, South or Birmingham, Hodge Hill, and, working with the Royal Mail board, we are determined to do everything that we can to ensure that Post Office and Royal Mail customers receive efficient and high quality services, which is why we are committed to a post office network containing bigger, brighter and more welcoming outlets that provide people with the goods and services that they want. We want customers to return again and again through choice, and not because they are tied to a post office in order to collect their benefit.
	Following years of neglect, which the previous Administration ignored, the Government have grasped the nettle to secure the future of Royal Mail and a viable network of post offices. Radical change is required if the   post office network is to remain relevant in a modern society. As my hon. Friend the Minister for Energy, E-Commerce and Postal Services pointed out in his opening remarks, we are investing substantial sums to support the transformation of the entire network. For example, £500 million of Government support for one of the UK's largest IT projects has resulted in the computerisation of every post office, which allows the Post Office to continue to make benefit and pension payments in cash and provides it with a vital opportunity to widen its customer base by increasing its range of banking products, which is key to its future.
	The heart of the Post Office's problem is that it has been locked into a shrinking customer base, because its income has been heavily dependent on benefit payments. I should like the House to compare the situation in 2001–02 with that five years previously, excluding benefit recipients who access money through a bank account. Even before the move to the direct payment of benefits and pensions, retirement pensions and widow's benefit paid by order books and giros decreased by more than 1 million from just more than 6 million to less than 5 million, although the total number of pension recipients increased by more than 1 million. Child benefits paid in that way dropped from just less than 5 million to less than 4 million, and incapacity benefit payments decreased from more than 2.5 million to less than 1 million.
	The drop in benefit transactions at post offices involves more than people switching to bank accounts, and I will not apologise for one such reason: our record on job creation and getting people off jobseeker's allowance and income support has resulted in the best employment figures for 30 years. I will not apologise for that record, but hon. Members know that it has implications for Post Office income, and post offices must therefore find an alternative future, which we are helping them to do.
	My hon. Friend the Member for Dumfries (Mr. Brown) reminded us that sentimentality, of which we have heard much from Conservative Members this afternoon, will not be enough to secure the Post Office's future. The Government want to implement the vision in the performance and innovation unit report of a thriving network, and the task is to continue to serve existing customers excellently, to attract new customers and to give the post office network access to expanding banking markets, rather than, as in the past, dwindling markets.
	We have heard much about the promotion of the Post Office card account, and I doubt whether the few remaining minutes will provide an opportunity to respond to every point. The Government remain committed to ensuring that those who want to can continue to collect their benefits and pensions at post offices free of charge after the move to direct payment. Last year's successful launch of universal banking services, which not only the industry, but many of the voluntary organisations to which my hon. Friend the Minister for Energy, E-Commerce and Postal Services referred in his opening remarks welcomed, has allowed us to keep that promise.
	Customers have three account choices under the new arrangements for benefit payments. They decide whether they want their benefit to be paid into a current bank account, a basic bank account or a Post Office card account. Choice is important, and the customer should decide which of those accounts is most appropriate to their circumstances. In the debate, we heard that a post office card is not necessarily appropriate for jobseekers, but it may be appropriate for other groups.
	The Government have always accepted that some people cannot open an account, including, for example, some homeless people or those with an illness, infirmity or disability—others may also be in that position for short periods of time. That is why my officials and I met customer representative groups last year, including the National Association of Citizens Advice Bureaux, Help the Aged, Age Concern and Mind, to ensure that the cheque-based system was designed to meet the concerns raised in this debate by my hon. Friend the Member for Dumfries and other hon. Members. The system is designed to avoid many of the fraud problems that we encounter under the current system—for example, 100 pensioners have their pension books stolen each week, which creates heartache.
	The heart of the Post Office's problems is that it has been locked into a shrinking customer base. Its task is to continue to serve those customers excellently, to attract new customers and to access expanding banking markets, rather than dwindling markets, as in the past. On top of the step changes in new banking services, other initiatives, including accepting debit and credit card payments, telephone services and a major advertising campaign for travel insurance and bureau de change services, contribute to making post offices places that customers want to visit. The Government want people to use the post office because they wish to, and not because they are forced to.
	The evidence clearly shows that the Post Office cannot prosper or even survive if it stands still, and the challenge is to adapt to meet the changing demands of customers and society. The Government are determined to make sure that the Post Office has that future and that it continues to provide the highest quality of service to its customers and to be the heart of local communities.
	We are making that investment. The Conservatives have made the investment of three Opposition day debates this year, but from the point of view of the people who work in the Royal Mail on behalf of the customers who depend so much on post office services, this will look like yet more of that party's crocodile tears. I commend our amendment to the House.

Question put, That the original words stand part of the Question:—
	The House divided: Ayes 163, Noes 253.

Question accordingly negatived.
	Question, That the proposed words be there added, put forthwith, pursuant to Standing Order No. 31 (Questions on amendments), and agreed to.
	Mr. Deputy Speaker forthwith declared the main Question, as amended, to be agreed to.
	Resolved,
	That this House supports the Government's strategy for a viable Post Office network; welcomes the delivery by Royal Mail of 93 per cent. of first class letters the next day in the first half of 2003–04; shares the Government's disappointment over the drop in performance since then, which rightly falls short of customers' expectations; calls on Royal Mail and the unions to work together to improve the quality of service; notes that the closure of any post office is regrettable but supports the Government's view that, without rationalisation, unplanned closures would continue, leaving damaging gaps in the network; supports the Government's commitment to ensure that at least 95 per cent. of the urban population will live within one mile of their nearest post office; supports the Government's commitment to ensure funding of rural post offices until at least 2006; welcomes the changes to the urban reinvention consultation process and the extension of the consultation process from four to six weeks; supports the Government's move to Direct Payment and welcomes the fact that already more than half of customers are getting their benefits, pensions and tax credits paid straight into accounts, of which 3.2   million are Post Office card accounts; notes that the Opposition wasted millions of pounds of taxpayers' money on the Benefit Payment Card scheme; supports the facility for those who cannot be paid through an account, particularly the most vulnerable older people, to receive a cheque payment; and recognises that change was needed and congratulates the Government for its strong, decisive action.

Personal Indebtedness and Savings

Mr. Deputy Speaker: We now come to the second debate on Opposition motions. I must announce that Mr. Speaker has chosen the amendment in the name of the Prime Minister.

Oliver Letwin: I beg to move,
	That this House notes that household indebtedness has now reached £1 trillion; is concerned that the household savings rate has halved since 1997; and believes that the Government, through the extension of dependency on means-tested benefits in retirement, its attack on the tax advantages of savings vehicles, and its £5 billion a year raid on pension funds, has diminished incentives to save.
	Two issues arise from the motion. One is short term and the other is long term. The short-term issue is indebtedness or household debt and the long-term issue is savings or their lack. I begin with household indebtedness. We have almost certainly reached the £1   trillion level of household indebtedness, which is broadly equivalent to our gross domestic product. That fact has become increasingly interesting to the media. A set of changes underlies that state of affairs.
	Household indebtedness has recently increased annually by approximately 12 per cent., despite having slowed a little from an even higher figure. Much of that has been in the form of mortgage indebtedness or secured lending. According to the latest reckoning, some £818 billion of mortgage debt forms part of the £1 trillion total. Mortgage debt, at around 13 per cent. a year, has been growing even faster than overall household indebtedness, although it, too, has slowed slightly.

Kelvin Hopkins: Surely that is not a problem, provided that people can finance their debt. Were we not simply rising out of a low level of debt after the collapse of the exchange rate mechanism and emerging from the recession that the right hon. Gentleman's party created?

Oliver Letwin: I agree that a given amount of debt is not a problem for those who can easily manage it. I shall shortly refer to those for whom there is a problem, but I also want to tackle the question of whether the current indebtedness causes a general problem for the economy as a whole. I hope that the hon. Gentleman will intervene again when we reach that part of my remarks, because I believe that ample evidence shows that there are problems on both those fronts. I want first to present the facts.

Lindsay Hoyle: Does the right hon. Gentleman want to return to the days of high interest rates for mortgages? Does he want them to double and treble? What are his views?

Oliver Letwin: Clearly, none of us wants mortgage rates to increase, and it is therefore regrettable that they had to rise recently and that they are likely—it is not certain—to increase in the near future. I would have thought that the hon. Gentleman and I agreed on that. I shall describe why the recent increase in mortgage payments is by no means purely an accident and how the actions of members of the Treasury Bench have partly created it. I hope that he will join me in regretting those actions.

Vera Baird: The four increases in interest rates have had an impact on mortgage lending. Secured lending increased by its lowest amount for nine months in May—significantly less than in April. It appears that people are capable of dealing with such debt and spreading it out.

Oliver Letwin: The hon. and learned Lady is right that, as I said, the rate of increase has slowed slightly. That is welcome. Unfortunately, as I also said, it is currently approximately a little more than 13 per cent. on an annualised basis and that figure is high. I fear that I do not follow the hon. and learned Lady's logic and that is unusual. Even when I do not agree with her, I can normally follow her logic and have done so in many debates. However, I cannot understand the argument that the fact that we have annual increases of "only" 13 per cent. in mortgage lending means that people will always be capable of fulfilling their obligations. I shall shortly outline why I believe that there is an increasing problem.
	Lending is not the only problem. A considerable amount of mortgage equity withdrawal is also happening. That was negative in the mid and late 1990s, but it is now running at about £60 billion a year. Our fellow citizens are drawing down on or adding to their mortgages by about £60 billion a year at present. Some of that is going on consumption, and some is undoubtedly being spent on the expansion of assets, as people add to their housing stock by enlarging and improving their houses.

Desmond Swayne: Would my right hon. Friend like to comment on the fact that a significant proportion of that equity release is going to people who have retired and who require it for consumption? They are certainly not using it to acquire additional assets.

Oliver Letwin: My hon. Friend is undoubtedly right: a substantial proportion is almost undoubtedly going for consumption. I say "almost undoubtedly" because there are no reliable figures available. Perhaps Ministers will tell us to the contrary tonight, but I know of no reliable survey that has been carried out into how much of that mortgage equity withdrawal is going on consumption and how much is going into assets. I fear that my hon. Friend is probably right to say that a substantial proportion is going into consumption.
	Labour Members are clearly gagging to hear what the problems are in this regard. We have set out the facts, and everyone knows the figures. Ministers undoubtedly have even more up-to-date figures. They probably receive updates every 24 hours; I do not know. In any event, we can all agree on the broad facts, but the question is: what do they mean? We do not have to take a flier on this, and we do not have to trust the views of politicians. Indeed, I do not suppose that many of our fellow citizens trust the views of politicians of any colour on these matters, alas.

Desmond Swayne: Shocking!

Oliver Letwin: Shocking it may be, but it is nevertheless the case that politicians are not much trusted in Britain today. However, some people are trusted, and one such person is the Governor of the Bank of England. One reason he is trusted is that he is the Governor of the Bank of England. Another is that he is the man he is. That powerful combination means that he is highly trusted, and he has said some remarkable things recently.
	The Governor of the Bank of England is a very subtle individual—more subtle, I suspect, than any of us in the Chamber tonight or, indeed, than any politician in Britain. Of course, it is in the nature of governors of central banks that they should be exquisitely subtle. I believe that it was Lord Cecil, under Elizabeth I, who was described as being so subtle as to be invisible. The Governor of the Bank of England, though exquisitely subtle, is not invisible, however. Indeed, he has recently become quite surprisingly visible. Governors of the Bank of England have frequently sought to be invisible, but he is not such a Governor. He has made himself visible by making remarks—admittedly, exquisitely subtle remarks—which, in their pointedness, have been perfectly well understood in the City of London by the economic fraternity, by journalists and, I suspect, by the Government, although they would certainly not admit it.
	What has the Governor said? In effect, he has said that the very large rise in household indebtedness, and the very large rise in house prices that is intimately linked with that, have not come about by accident. They are associated with the activities of the Chancellor of the Exchequer in enlarging Government. We have a bigger Government, more spending and more borrowing. The Governor of the Bank of England has said that he is not persuaded that there is a sustainable path in place—or at any rate, that is what he has, in his exquisite subtlety, suggested.

Kelvin Hopkins: rose—

Oliver Letwin: I shall give way to the hon. Gentleman, because I have now arrived at the first point that I made to him a moment or two ago.

Kelvin Hopkins: The right hon. Gentleman seems to be suggesting that, if the Government have a fairly generous fiscal policy—with which I totally agree—the Governor of the Bank of England should intervene and introduce high interest rates to dampen the economy with monetary policy. Would that not be a dangerous intervention in politics? Would not the Government be right to say, "Hang on. Dealing with inflation is one thing, but countering Government policy is another."?

Oliver Letwin: Oh dear, oh dear! I shall have to save the hon. Gentleman from his wit and, indeed, from those on the Treasury Bench. I hope that I shall be able to provide him with sufficient armour plating in case he should meet the Chancellor in the near future, because what he has suggested runs counter to the entire structure that the Government established—rightly, I may say—when they established the independence of the Bank of England. The whole point of that independence is that it acts as a check on undue extravagance or fiscal laxity on the part of the Government, and it is acting in just that way now. The Governor is not disobeying his remit; he is fulfilling it. He is doing what the Chancellor of the Exchequer asked him to do when the Bank of England was made independent and an inflation target was established.
	I expect that the Chancellor has frequently congratulated the Governor on what he has done. I imagine that he has been sending messages to the Governor over the past few weeks to thank him for his advice and to let him know just how grateful he is to the Governor and his colleagues on the Monetary Policy Committee for raising interest rates to counteract the effects of fiscal laxity in the pre-election spending spree that the Government are wrongly engaging in. I imagine that the Chancellor is also thanking him for warning him in advance that interest rates might also need to rise further as a result of that.

Kelvin Hopkins: The Governors of the Bank of England—two of them, now—have played a splendid game and, in my view, they have got interest rate policy right. However, there is a difference between adhering to an inflation target and deciding to counter Government fiscal policy.

Oliver Letwin: But it is perfectly clear that the Governor and the Monetary Policy Committee as a whole are, in a serious-minded way, trying to live up to the inflation target. It is not that they are trying to counteract Government policy; they are trying to counteract the effect of that policy on inflation—not only on asset price inflation but on general inflation. Indeed, it is general inflation that they are required by law to target, and they are doing so. However, asset price inflation has an effect on general inflation. Household indebtedness, when it consists of a large amount of mortgage equity withdrawal and a large increase in mortgage lending, has an effect on house prices. The Governor is quite rightly taking all those factors into consideration.
	A short-term problem for the economy is being generated by a traditional, classical pre-election spending spree, which is being financed by traditional, classical deficit financing. That is not what we were told this Government were about, or what this Chancellor was about. We must thank the Lord that we have a central bank that is able to counteract the effect of that activity. We shall not see it come through in inflation, but we are seeing it come through in higher mortgage payments. To address the point raised by the hon. Members for Luton, North (Mr. Hopkins) and for Chorley (Mr. Hoyle), I would suggest that that might become a problem for the fairly large section of the population whose mortgages represent a substantial multiple of their income and which were, and probably still are, quite affordable because of low interest rates, but which will become progressively less affordable as interest rates rise.
	I am not making a partisan point here; I am reflecting the point made by the Governor of the Bank of England. He has pointed out that house prices—and hence mortgages—are at multiples of income levels that could cause difficulties to some people if they do not watch out.

Tom Harris: Under the Conservative Government, we had relatively low levels of public spending and historically high interest rates. Now we have very high levels of public spending and historically low interest rates. Is the right hon. Gentleman saying that he prefers the former option?

Oliver Letwin: The cause of the high interest rates—

John Robertson: Answer the question!

Oliver Letwin: Of course I am going to answer the hon. Gentleman's question. I would not have given way unless I intended to do so. I always answer questions; it has been my downfall on many occasions. I shall certainly do so now that I have the right answer.
	The cause of higher interest rates is not purely due to the expenditure, but to the fact that it is being deficit-financed. The Government have gone on a spending spree through deficit financing, and there is every prospect of those deficits remaining large for some time. Indeed, there is some question as to whether the Chancellor is going to be able to obey his own fiscal rules. The Government are therefore pushing interest rates up by engaging in fiscal laxity, which is called a pre-election spending spree. There is no way the hon. Member for Glasgow, Cathcart (Mr. Harris) can get around that by saying that some other Government at some other time did something else. The fact is that the Government are doing something to the country: they are pushing up mortgage payments.

Kelvin Hopkins: I thank the right hon. Gentleman for giving way yet again; he is very generous in taking interventions. Is not the basic reason why our Government have had such success with the economy that they have kept sustained demand by having a reasonable fiscal policy and relatively relaxed monetary policy as well? Is he suggesting that we should do something different?

Oliver Letwin: Oh dear. I will have to provide the hon. Gentleman with even more protection from the Chancellor, because the Chancellor has long claimed that his fiscal policy is intended not to be a demand management system, but to stick within very strict fiscal rules to ensure the long-term and medium-term sustainability of the public finances across the cycle. As a matter of fact, I agree with the Chancellor and not with the hon. Gentleman.
	The problem with the Chancellor is not that he does not have the right idea, but that at present he is not following it very well. Thank goodness, the Governor and his colleagues are taking appropriate action, but the corollary of that is that there are people for whom there is an increasing instability—an increasing problem of the relationship between their mortgage payments now and their likely mortgage payments in the near future and their income. This is not a crisis, but it is a problem. If it becomes much bigger, it could turn into a serious problem.

Sally Keeble: I would agree with the right hon. Gentleman's argument except that, under the last Conservative Government, people in my constituency who did feel the rub felt it because there were high interest rates, a crash in property prices and high unemployment. There is absolutely no sign of those last factors being remotely on show now, and interest rates are increasing only slightly.

Oliver Letwin: For the sake of the country, I profoundly hope that the hon. Lady is right and that there will not be any horrible sequel. I hope that as a householder, as a parent and as one who is concerned about the welfare of this nation. That, I am sure, is common ground across the House—but let us not be complacent.
	Let us be clear about the fact that when there are very high multiples at work, when there are increases—which, although from a low base to a low number, are nevertheless in proportionate terms quite large—in people's mortgage payments of 10 or 20 per cent. in many cases, and when those may go up overall by 30 or 40 per cent., again admittedly from a low base, problems can be engendered. We should not consider that lightly. We should not ignore it; we should not be complacent about it. That is my first point.
	My second point is that, for some people—I absolutely accept that this is only a restricted group who are on low incomes—there is, unfortunately, accumulating evidence of the problem of the debt spiral. For such people, this is not a minor matter and it is far from a laughing matter. It can cripple lives. It is very small so far, thank goodness. Let us hope it remains so, but around us are signs of more people who are closer to it than we can be comfortable about.
	I believe that 42 per cent. of those with new babies are in arrears, as are 48 per cent. of lone parents and 52 per cent. of those who are recently separated. Those are all life circumstances that tend to give rise to considerable indebtedness, and I do not say that this is a sudden crisis, but I do say that if we asked the citizens advice bureaux and the various debt advisory bodies we would receive the same response from them all.
	The problem is not currently widespread and it has not reached crisis proportions, but there is a worrying increase in the number of low-income individuals who are caught in debt spirals. That, I think, will worry everyone on both sides of the House. I hope that there will be a considerable consensus also on how to deal with it.

Kelvin Hopkins: Will the right hon. Gentleman give way?

Oliver Letwin: In a moment. My hon. Friends and I have promoted—I think for the first time in Britain—a wide-ranging seminar among the lenders and those concerned with debt advice. No doubt the Treasury has seen both groups individually; we tried to put them together. Also, we have asked Lord Griffiths of Fforestfach—who, incidentally, has the distinction not merely of advising us, but of having advised the Chancellor on international debt issues, and who happens to be someone with real understanding of these issues—to look in fine detail, by going out and asking, at what really are the circumstances that give rise to debt spirals and to make recommendations, which of course we will share with the Government and with other parties, on how we can cure that problem.
	Those are the short-term problems, as I see it, and I want to move on to a great big problem of a very long-term and deep kind, which is what has happened to savings in this country.

Kelvin Hopkins: rose—

Oliver Letwin: Before I do so, I shall give way—

John Redwood: Will my right hon. Friend give way?

Oliver Letwin: Of course, but may I give way first to the hon. Member for Luton, North, as he has been my most persistent questioner?

Kelvin Hopkins: I thank the right hon. Gentleman for giving way yet again. He seems to be suggesting that we ought to tighten monetary policy. The effect of that would be not only to moderate house prices, but to push them down. If house prices fall, people could fall into negative equity and perhaps even have problems with sustaining their mortgage at all. Would that not make debt far worse and bring people to the situation that pertained 10 years ago in my constituency, which was the No. 1 for negative equity and repossessions?

Oliver Letwin: Let me be clear with the hon. Gentleman: I am not making a recommendation about monetary policy, because I believe in what he clearly does not. I believe in the structure that the Chancellor himself established; I believe in the independence of the Bank of England; and I believe it is right that decisions on monetary policy should be taken by a group of people removed from politics.
	My argument is very clear: the Chancellor has created circumstances with his pre-election spree that are leading the Bank of England to a certain set of responses, which it is trying to engage in very delicately, subtly and carefully precisely to avoid circumstances of the kind to which the hon. Gentleman refers. There is no question at all but that members of the MPC are acutely aware of the dangers to which he refers and seek to avoid them, but the fact is that it would be better if the Chancellor had not put them in the position of having to respond as a result of the spending spree and the deficit financing in which he is engaging.

John Redwood: Given the crucial nature of house prices in this country—they are central to economic well-being—is my right hon. Friend as disturbed as I am about the row that is clearly under way between the Governor of the Bank of England on the one hand, warning that house prices might fall, and, on the other, the Treasury, spinning like mad through the press, for obvious reasons, that they definitely will not, or at least certainly not before an election?
	Would not it be better if the debate were held in the open and the Chancellor made both a statement on the subject and adjustments to the remit of the Bank of England, if he is as unhappy with what it is doing as he seems to be, because he is right in thinking that house prices are central to the future economic well-being of our country?

Oliver Letwin: As usual, my right hon. Friend is right, as well as being honourable. He accurately diagnoses a real problem. The Chancellor has set up the independence of the Bank of England, and presumably believes in it, but he does not like it when the Bank of England acts in the way that his remit asks it to. Of course, he does not want to say that, because it would be a mite embarrassing to set something up and then, when it does the thing it has been asked to do, get explicitly cross about it.
	So, the Chancellor sends his henchmen out to say, inexplicitly, that he is absolutely furious about it, in the hope that, somehow or other, this message will, by osmosis, reach the Governor and that the Governor will desist from saying and doing what in fact the Chancellor has asked him to say and do. Of course, my right hon. Friend is absolutely right that it would be much more open if the Chancellor were to make a clear statement on his views about the Governor. I think that the chances of that occurring are exactly as high as those of pigs flying.
	Now, savings. This is very serious stuff, because savings matter enormously to our economy and to our society. We cannot have a strong economy across the decades unless the domestic savings ratio is relatively high. Ultimately, the productive capacities of our economy across a long period are heavily determined by the degree to which we save and invest as a nation.
	No Government in British history since the war have managed to achieve as high a savings ratio as many of us would like. I recall, as my right hon. Friend the Member for Wokingham (Mr. Redwood) will also recall, times under the previous Administration when we worried—I think we were right to do so—about whether the savings ratio was high enough. Little did we know.
	At that time, the savings ratio averaged just over 9 per cent. That was the proportion of our national income that we saved on average between 1979 and 1997. We thought that that was not good enough, but since 1998, persistently, that ratio has been significantly lower. Between one point at the end of the previous regime and one point now, it almost halved. On average, it has gone down by a third. This is very worrying. It does not matter for six months; it matters an awful lot across a long period.
	Why has it happened? There are all sorts of reasons, and it is important to disentangle the most important from the less important, and to try to get a clear picture of what Governments can and cannot do about it. There is a major accusation to be levelled against the current Government, and a major step that this country needs to take to resolve the problems caused by the Government in this area.
	Before I describe those two points in more detail, let me say that it is very misguided, should Ministers or others wish to do so, to blame the savings industry primarily. The savings industry is not perfect—no industry is perfect, and nobody is perfect—but it tries on the whole to do its best. Most of the problems that afflicted the savings industry are on the way to being, to a considerable degree, cured. There is a vast expansion of a much more transparent form of saving through unit linking. There is no doubt at all that prices for savings products have been coming down. There is no doubt at all that the savings industry is now engaged in much more realistic risk assessment than previously, and although I am in some respects a critic of the Financial Services Authority, some of the credit for that goes to the FSA. We cannot stand here blaming the savings industry for the reduction in the savings ratio in recent years. Certainly, it is not the principal culprit.
	When we turn to the Government, however, I fear that the position is different. First, there is the £5 billion a year raid on the savings industry. Recently, we have begun to see just how serious that was. Recent figures, which have come to light in the past few days, indicate that the extent to which that bit into what were otherwise tax advantages for saving was greater even than imagined at the time, when many Conservative Members complained vigorously and bitterly about the £5 billion raid. Evidently, when the Prime Minister claimed that the £5 billion raid was to be justified because equity prices were high, he was not to know, but he might have guessed, that there would come a time when equity prices were not so high. The £5 billion a year raid has a bizarre effect: as well as causing more trouble now that equity prices are not as high as they once were, it has undoubtedly contributed to the underperformance of the UK stock market, which has underperformed every other major stock market except Japan's in recent years.
	Alas, the £5 billion a year raid is not the only item to discuss in terms of diminishing the attractiveness of savings in this country.

John Redwood: My right hon. Friend makes an extremely powerful point. The main raider that has damaged the savings industry is the Government. Will he remind the House that the Opposition not only warned at the time that it would do damage but quantified it? We said that because the market then valued a stream of income from a company at 20 times the income, if the Government took £5 billion a year out of the stock market, £100 billion would be knocked off the value of shares earned by all those pensioners and savers in the country. It was a smash-and-grab raid, it took £100 billion off, and the Government should apologise and give it back.

Oliver Letwin: There is no doubt that that is accurate—it constituted a smash and grab raid. The Government grabbed a large amount of money, and smashed a large amount—clearly, my right hon. Friend's approximate figure of £100 billion is of the right order of magnitude—off the value of savings in this country.

Vera Baird: We must keep our feet on the ground about this alleged smash and grab. The Tory Chancellor Norman Lamont twice cut the rate of the advance corporation tax concession, of which the right hon. Gentleman now makes such major complaint, and clearly saw it as an anomaly even then. I have not heard about any Tory cuts to restore it.

Oliver Letwin: I shall come on to what we intend to do to remedy those bad effects. The problem with the hon. and learned Lady's argument, which is exactly what I was about to discuss, is that the £5 billion raid was not in the context of a large number of other measures of the kind that my right hon. and noble Friend Lord Lamont was then taking to try to encourage savings. Alas, it was in the context of a set of other raids on savings, decreasing their tax advantages.
	This Government have reduced significantly the attractiveness of individual saving accounts, for example. ISAs are now significantly less attractive in many respects than their tax-exempt special savings account and personal equity plan predecessors, which were the brainchild of none other than Lord Lamont and his colleagues. In various and important respects, the Government have made savings less tax advantageous in this country. There is no getting away from the fact that that can only have one effect directionally: it cannot increase the savings ratio; it must tend to reduce it. As we know, as an empirical fact, that the savings ratio has on average gone down by a third, and point to point, by a half, some of that is undoubtedly caused by the Government's actions. They are not the main ones, however, as I will come on to the real disaster story in a moment.

Vera Baird: Let me come back to the advance corporation tax. The right hon. Gentleman is wrong that it was not accompanied by other measures. The corporation tax rate was cut at the same time. I asked him once, and I ask him again, whether there are any plans to restore this alleged concession, which was the source of such a smash and grab.

Oliver Letwin: I shall come on to something that we will do to cure the biggest of the problems that are attached to, and are the cause of, the reduction in savings. That is the first place to put the money. We would like to do many things, but there is one that we must do. I shall deal with that now, because without it, as far as the long-term picture for savings in this country is concerned, we are sunk.
	One of the saddest things about the Government is that they started with the possibility of a real improvement in the character of our country through the achievement of a real consensus. The right hon. Member for Birkenhead (Mr. Field) came into government at the beginning of this Government's tenure with great hopes invested in him not merely by Labour Members—I suspect that many Labour Members did not invest great hopes, including the Chancellor, who hoped that he would soon disappear and achieved that ambition—but by Conservative Members and by the country more widely, and rightly so. For many years, he had with passion, vigour and intelligence identified a critical feature of the problems facing this country—means-tested benefit dependency was causing an erosion of the savings culture. He set to work to try to deal with that, and he received the backing of my hon. Friends. I remember walking into the Lobby with him and his friends on the Labour Benches, to the discomfiture of some Labour Members, on a famous occasion, as we were so determined to support actions that could rescue us from an over-dependence on means-tested benefits in this country. Alas, as we all know, it did not take terribly long for the Chancellor to destroy not only the ambitions but the policies of the right hon. Gentleman and to move in precisely the opposite direction.
	The Prime Minister, when he was Leader of the Opposition, said that he wished to see the right hon. Member for Birkenhead think the unthinkable. Little did he know that the Chancellor of the Exchequer was going to think the unthinkable—that means-tested benefits should be widely expanded in Britain by a Labour Government. That was a most astonishing, and much more importantly, catastrophic turn of events. Fifty-four per cent. of our pensioners are now on means-tested benefits of one kind or another, and the number is growing apace. Most people believe that, on present policies, it will not be long before three quarters or so of our pensioners are on means-tested benefits of one kind or another.
	The right hon. Member for Birkenhead has rightly made it clear what he thinks the effect of this is and will be. He said that the message is going from grandmothers to grandchildren, "Don't bother to save dear, it didn't do me any good." What does he mean? He means something clear: if a person has saved throughout their working life less than £180,000, there is a strong chance, and a great likelihood, that they will find at some point, at the end of their working life, that they are losing between 40p and 85p in the pound for each pound of income from saving. It is not worth it.
	Of course, the savings industry recognises that. It is terrified of mis-selling, appropriately, and is therefore increasingly not aiming to sell savings policies to a group of people whom it knows will typically lose a large part of income from savings later in life. It knows that that could be regarded, ex post facto, as a terrible example of mis-selling.
	Alas, much of our nation's saving has always been through inertia. Much of it occurs only if the savings industry makes us save by coming to us with the product. When the industry desists from that for fear of mis-selling because of means-testing of benefit for those in retirement, the savings ratio drops. That is the single biggest cause of the present problem—the present disaster—of the reduction of a savings ratio that was already too low by a third—or by half, depending how it is measured. Until the increase in means-tested dependency is dealt with, this terrible problem will continue.
	There has also been a catastrophic social effect. I do not know what single thing could do more to harm the social fabric of the country than a message sent to hard-working people who save that saving is not worth it, and that those who have saved will be clobbered. That strikes me as profoundly wrong—and it is another of the points made so powerfully and passionately by the right hon. Member for Birkenhead over so many years.

Bill Tynan: The right hon. Gentleman has made great play of his belief that means-tested benefits are the main problem in terms of poverty. What would he tell the individual in my constituency who found that she did not qualify for the minimum income guarantee because she had £26,000 in the bank, and now finds herself—with that £26,000 in the bank—gaining by £46 a week from pension tax credit?

Oliver Letwin: I would tell that lady that when we have done what we need to do, and what the country needs us to do, and what the hon. Gentleman's party will eventually agree with us must be done, she will be as well off as under the present scheme, but people will not have the same disincentives. What we need to do as a country is take our courage in both hands, and raise the basic state pension to the point at which it will cross over with pension credit.

Sally Keeble: Will the right hon. Gentleman give way?

Oliver Letwin: I will in a moment, but I want to make this point because it is absolutely critical. Opposition Members can then debate it at length. I do not think that anyone could accuse me of having been ungenerous in giving way.
	Unless we take our courage in both hands, we will not solve the problem. The difference between the basic state pension and pension credit is that, unlike the basic state pension, pension credit is means-tested. In our first Parliament, we can lift a million pensioners out of means-tested dependency by raising the basic state pension in line with earnings, and we need to do so. We need to meet the associated costs, and my spending plans provide for that. Half will be met by erosion of the entitlements of those whose basic state pensions are rising to means-tested benefits that they will not need because their incomes from the basic state pension will be rising. The other half, in those first four years, will be met by removal of almost all the new deal, which has been an expensive failure.
	At the beginning of the present Administration, a million young people were not in work, not in training and not in education. Now, £310 million a year later, with a new deal for the young unemployed, what do we find? A million young people are not in work, not in training and not in education. What a way to spend money that we could be spending on raising the basic state pension and restoring the incentive to save.

John Gummer: Will my right hon. Friend give way?

Oliver Letwin: I give way, finally, to my right hon. Friend.

John Gummer: May I return my right hon. Friend to his point about the effect on the nature of society? It is a crucial issue. If a large number of ordinary people have nothing at stake in society, their attitude to society must be fundamentally changed. The one common factor in the history of recent years is that societies that get into that state very soon break down, as social cohesion itself breaks down.

Oliver Letwin: I agree profoundly with my right hon. Friend. When all has been said about the economic effects of the diminution of the savings ratio, the short-term effects of the encouragement of too much household indebtedness and the precariousness of our housing, that abiding social question is the most important.
	The fact is that we cannot expect to go on having the kind of society in which we want to live if it is a society in which a large number of people approaching retirement look to those of working age to sustain them, thus creating a persistent tension between the two groups. We must have a society in which all of us, in our working lives, believe we have a reason to build for our retirement in due course, if we have the financial capacity. That is the way in which we can create social cohesion, and the way in which we can reward fairly those who make an effort to do the right thing. If there is one important thing about society, it is that it rewards those who try to do the right thing.
	That is what we need to do, and the fact that the Government are doing the opposite will be their undying shame. I hope it is not too late for them to recognise that, and come round to our view on this critical matter. If that does not happen, we shall see persistently low savings, the corrosion of our society and long-term economic damage.

Paul Boateng: I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:
	"believes that a strong and stable economy is the foundation of families' confidence in their own finances; notes that economic stability has delivered low and stable inflation, interest rates have been at their lowest since the 1950s, employment is at a record high and unemployment at its lowest since the 1970s; further notes that as a result households are better able to judge their long-term commitments as macroeconomic stability has reduced the risks to household finances of sudden and sharp rises in interest rates as seen in the past; believes that the Government has tackled the scandals it inherited and created a world leading system of financial regulation allowing people to save with confidence, simplified savings markets allowing people to make informed choices about what and how to save and taken action to tackle financial exclusion; recognises that most household debt remains affordable and that total interest payments are now 7.6 per cent. of disposal income compared with 15 per cent. in 1990; believes the biggest risk to household finances and consumer confidence would be a return to economic instability; and rejects the short-term boom and bust economic policies of the past that saw interest rates hit 15 per cent. and inflation hit 10 per cent. in which circumstances households had to save more to make up for the loss of value of their savings due to inflation and prepare in the event of becoming unemployed."
	This Government have delivered an unprecedented period of stability and growth. Notwithstanding the doom and gloom that is the stock-in-trade of some—although, in fairness, not all—Conservative Members, this Government are confronting the demographic challenges surrounding provision for financial security in old age with vigour and determination. I hope that we shall be able to demonstrate that this evening to the satisfaction of the House. Indeed, I think my hon. Friends' interventions on the speech of the right hon. Member for West Dorset (Mr. Letwin) demonstrate Labour's commitment to savings, to pensions and to the importance we ascribe to sustainability, in terms of not just public but personal finances.

Kelvin Hopkins: Will my right hon. Friend give way?

Paul Boateng: I shall be only too happy to give way to my hon. Friend shortly. I saw him in action during the right hon. Gentleman's speech. However, I should like to have my little say first, if I may.
	Those are real demographic challenges, and we are confronting them. We are creating the right incentives for saving, and extending the opportunities created by savings to those previously denied them. Nevertheless, there is no room for complacency. For most households, debt remains affordable. Interest payments currently amount to 7.6 per cent. of disposable income, compared with highs of over 15 per cent. in 1990, when the economy was under the stewardship of the Conservatives. Consumer confidence remains above its long-run average, reflecting sound fundamentals. Low inflation, and expectations of low inflation, mean that households are better able to make judgments about what debts to take on. As I have said, however, there is no room for complacency.
	We have that in common with the right hon. Gentleman and, I hope, with all Members on both sides of the House. We accept that there are those who are not saving adequately for their retirement. Some 3 million are seriously under-saving, and between 5 million and 10 million should be saving more. The Government are addressing that, aiming not to tell people how much they should save but to enable them to make informed choices about retirement. Such informed choices are the bedrock of our policy.
	Now I give way to my hon. Friend.

Kelvin Hopkins: I merely wanted to reinforce my right hon. Friend's point about sustainability. Does he agree that a crucial component of sustainability is ensuring that consumer demand is kept at a sensible level so that the economy can continue to prosper?

Paul Boateng: That component undoubtedly plays its part.
	The contribution of the right hon. Member for West Dorset was a serious and informed one, although I disagreed with a number of aspects of it. It was interesting to hear the praise that he now affords to the monetary policy framework that my right hon. Friend the Chancellor put in place, and which has indeed delivered this long and sustained period of economic stability. In the Mansion House speech to which the right hon. Gentleman referred, that economic stability drew congratulations from the Governor of the Bank of England. Indeed, the Governor offered congratulations not just on the Chancellor's longevity, but on the
	"successful pursuit of economic stability—not even Gladstone achieved such stability."
	The cornerstone of that stability has been the monetary policy framework, which has delivered low and stable inflation. Central to that have been the role of the Monetary Policy Committee and the independence of the Bank of England. But the right hon. Member for West Dorset, who has shared his views with us this evening, voted against the creation of the MPC, and was opposed to giving independence to the Bank of England. As with a question of pronunciation—"Cecil" or "Cicil"—a vote of opposition remains a vote of opposition, and that is what we got from the right hon. Gentleman. I am glad that he has come round to our way of thinking, and I hope to persuade him this evening to come round just that little bit more, and to recognise what we are trying to do.
	Let us consider the reality of higher savings in the early 1990s. The right hon. Gentleman referred to the period in which the Conservatives were responsible for the stewardship of the economy, and to the track record of Lord Lamont. To do so in the way that he did was a little surprising. It would not be uncharitable to say that Lord Lamont scared many people into saving, because they were aware of the consequences of the boom and bust period that I fear characterised the Conservatives' stewardship of the economy.

Kelvin Hopkins: Is this the same Lord Lamont who sang in his bath when the economy was in the greatest crisis of the last three decades?

Paul Boateng: I am not privy to what occurred in Lord Lamont's bathroom, save to say that it is undoubtedly true that while he was Chancellor, all sorts of ills and misfortunes were visited on our nation's economy. If my memory serves me well, the right hon. Member for West Dorset was then a young, up-and-coming tyro in Conservative central office; indeed, he may even have been at the Treasury at the time. He will correct me if I am wrong, but he certainly had a hand in matters and would want to have a hand in them again.
	The reality was that in the 1990s, households—

Oliver Letwin: Will the right hon. Gentleman give way?

Paul Boateng: Of course.

Oliver Letwin: Just to correct the right hon. Gentleman, I am flattered that he thinks me so young, but actually I left the employment of Her Majesty's Government some six years before Lord Lamont entered the Treasury. At that time, I pursued my business in the private sector, so I am very well aware of the problems to which the right hon. Gentleman refers. Is he seriously arguing that the savings ratio was as high as it was between 1979 and 1997 only because people were continuously scared into saving, and is he suggesting that he wishes now again to scare them into saving?

Paul Boateng: I make no such point, but I do say that households had to save more to make up for the loss in value of their savings due to inflation, and to provide a cushion in the event of being unemployed. The right hon. Gentleman ignores the fact that the asset side of the household balance sheet today remains strong. Household net wealth, taking account of the recent fall in equity prices, is more than 50 per cent. higher than at the beginning of 1997. So this debate has to be placed in the framework of a thriving economy.
	Britain's economy, alone among the major industrialised economies, has not only averted recession and continued to grow in every quarter for the past seven years; it has also had the longest period of continuous sustained growth for some 200 years. We have the lowest inflation levels for 40 years, interest rates have been at their lowest since the 1950s and we have the highest employment levels in our history. Again, there is no room for complacency, but economic stability, continuing economic growth and sound public finances do provide the best environment for savings, and for ensuring that existing levels of household debt are sustainable.

Oliver Letwin: rose—

Paul Boateng: I give way to the right hon. Gentleman.

Oliver Letwin: I am doubly grateful to the right hon. Gentleman for giving way again. I am glad that he thinks there is no room for complacency. Does he agree that there ought not to be, given that our growth rate is the lowest of the Anglo-Saxon economies, our productivity growth rate has gone down by a third, our savings ratio has halved, we have dropped from fourth to 15th in the international competitiveness league, Ireland now has a higher per capita income than ours, we have the largest trade deficit since the 17th century, and we are facing the very serious problem of over-inflated house prices?

Paul Boateng: I really am sorry that the right hon. Gentleman adopts that approach. The reality, as he will recognise, is that the economic fundamentals of this country, in comparison with those of our partners and competitors, shine out as an example of what stability can bring and of what needs to be done to create jobs. Some 2 million jobs have been created since 1997, and Members from all parts of the House ought not to forget that it was the Opposition who told us that we would lose 1 million jobs as a result of introducing the minimum wage. That is the reality.
	In 1997, we inherited the historical legacies of poor and ineffectual financial regulations, the pension mis-selling scandals of the 1980s and a lack of initiatives to educate and support consumers effectively. The right hon. Gentleman will understand, therefore, why we decline to take from the Opposition lessons on the virtues of saving and on our own supposed failures in that respect. In tackling that inheritance, we have created a world-leading system of financial regulation. That is not just our doing; it is the result of a partnership with the industry and with those who make, and who are responsible for the creation of, the wealth in the City of London and throughout the United Kingdom. The right hon. Gentleman really ought to pay tribute to that partnership.
	We have overhauled the regulation of financial services, which led to the Financial Services and Markets Act 2000. We have set up a single regulator, in the form of the Financial Services Authority, to ensure that the market is properly regulated through a risk-based approach. Many other countries have now copied our successful, world-leading approach by establishing their own unified regulators, and we have created a single ombudsman and a single compensation scheme for consumers, ensuring that they have free access to redress and compensation. All of that was necessary to give people a sense of confidence in saving, and to create the context in which our strategy for promoting saving and asset accumulation can succeed. It is founded on some important principles. Those principles address opportunity, security and responsibility, and I see no reason why they should divide us across the Floor of the House. We embrace those principles because they underpin the very notion of the welfare state. On the principle of opportunity, assets enable individuals to take advantage of opportunities throughout life and widen choice. On the principle of responsibility, the development of the savings habit promotes independence. On the principle of security, individuals can be assisted to accumulate a stock of financial assets for times of adversity. Those principles should unite us in agreement that they should form the basis of effective policy.

Kelvin Hopkins: The right hon. Member for West Dorset (Mr. Letwin) listed the apparent problems of the British economy. He seemed to suggest that we should tighten monetary policy and raise interest rates, but would that not strengthen the pound, depress investment and make our balance of trade position worse, thus damaging the economy? Does my right hon. Friend agree that our policy of lower interest rates is more sensible?

Paul Boateng: I certainly endorse our policy. Indeed, it would be rather alarming if I did not! I also cast doubt on the remedies proposed by the right hon. Member for West Dorset and some of his right hon. and hon. Friends. We would like to know a little more about those policies, how much they would cost and how they would be paid for. The right hon. Gentleman was remarkably reticent about that. I hope that he has had discussions with the hon. Member for Havant (Mr. Willetts), who has come up with a range of products that apparently are the answer to the problems that the right hon. Gentleman outlined. We look forward in the coming days, weeks and months to seeing the bill for some of the hon. Gentleman's proposals. I hope that the right hon. Gentleman can assure us tonight that those proposals have been costed and that he has approved them. He says, "Of course." In that case, he will no doubt tell us how much they will cost in due course, although the hon. Gentleman was remarkably reticent on the issue in his press release before tonight's debate. We will tease the details out in due course.
	We are charged with the responsibility of encouraging people to save for their futures and of working with the industry so that it provides products that people can understand and trust.

Bill Tynan: The Government should be praised for their economic record over the past seven years. However, one of the issues that we should address is the practice of the banks in sending offers of loans to individuals that make it very easy—especially for young people—to fall into debt. Do the Government intend to deal with that problem, which discourages saving and increases indebtedness?

Paul Boateng: I know that my hon. Friend has taken an especial interest in that issue and I shall describe shortly several measures that my right hon. Friend the Secretary of State for Trade and Industry is taking and that he will find of interest.
	We have developed a stakeholder product suite to ensure that consumers have access to simple, good value investment products, with increased incentives to save. The right hon. Member for West Dorset mentioned ISAs, which were introduced in 1999. More than 15 million people now have an ISA, with more than £130 billion subscribed. He should remember in his strictures to us that ISAs are supported by some £1.6 billion of tax relief for saving. The suggestion that we do not back ISAs with tax relief is not fair. ISAs have increased take-up of savings products compared with TESSAs and PEPs, for both low-income earners and the young.
	On top of tax-free savings products such as ISAs, a 10p starting rate of income tax has applied to income from savings since April 1999, with a lower rate of 20 per cent.—rather than 22 per cent.—applying up to the basic rate limit. We are also looking at new ways of supporting savings, such as the saving gateway, through which the Government match the savings of low-income families up to a limit of £375. Initial indicators from an interim evaluation are positive.
	In last year's Budget, the Government also introduced the child trust fund, which the Conservatives have criticised and the Liberal Democrats would axe. It is a ground-breaking initiative that will strengthen financial education, promote positive attitudes to savings and ensure assets for all children, regardless of family background. All children will receive £250 and children from poorer families will receive £500. The Government will also make further payments when the children reach the age of seven.
	We are also taking specific steps to raise the level of consumer financial literacy so that consumers are empowered to make informed choices and manage their finances better. With the support and active involvement of the Financial Services Authority, we seek to ensure that, year on year, the scale, range and topicality of its public awareness work adds to that financial literacy.
	We are aware of the need to tackle financial exclusion and we are taking steps to do so. In the Budget this year, we committed to continuing our efforts, working in partnership with the sector and with voluntary and community bodies to achieve dramatic reductions in the number of households without bank accounts and a significant increase in the availability of affordable credit for those on the lowest incomes. The right hon. Member for West Dorset is right to draw attention to the particular dangers of debt for those on low incomes. We all know from constituency experience of the ravages of loan sharks on some of our more deprived housing estates. It remains our ambition to achieve a step change in the availability of free debt advice.
	I can tell my hon. Friend the Member for Hamilton, South (Mr. Tynan) in response to his question that my right hon. Friend the Secretary of State for Trade and Industry introduced a consumer credit White Paper in December last year, in which she set out a policy on tackling over-indebtedness, unfair lending practices and loan sharks. The next phase of that work will come later this month, with the publication of the DTI's strategy for low-income, indebted households. Real issues are being addressed with practical policies.
	The issue of pensions is a legitimate one for concern. The issues include longer lifespans, the level of pension saving, the complexity of products, and the number of people leaving employment too early and too suddenly. We are taking action to address those issues. We have introduced a Pensions Bill that sets out our proposals to renew the pensions partnership between the Government, individuals, employers and the financial services industry; introduces the pension protection fund; radically simplifies the taxation of pensions; replaces the eight current regimes with a single lifetime allowance on the amount of pension savings that can benefit from tax relief; and empowers individuals to make informed choices about working and saving for retirement, so that future pensioners receive the income in retirement that they are entitled to expect.
	The Pensions Bill is being backed up by practical measures to bring home to people the reality of the situation that they may face. We will issue 1.6 million state pension forecasts to the self-employed by the end of 2003–04. We will be sending out 8 million automated state pension forecasts in 2005–06. By the end of that year, we shall ensure that more than 6 million people receive combined pension forecasts that give details of current private pension arrangements as well as state pension income. All that will contribute to greater awareness and understanding so that people can make informed choices. We believe that confidence in our occupational pension system must be restored and we have taken the necessary steps to restore it.
	The right hon. Member for West Dorset made much in his remarks—as he often does—of changes to advance corporation tax. My hon. and learned Friend the Member for Redcar (Vera Baird) highlighted the issue, but unfortunately even after the right hon. Gentleman's responses to her questions we are no clearer as to whether he has any intention of reversing our actions on ACT. He had the opportunity at least to tell us that it features among his priorities, but there was not a word.
	That is hardly surprising, however, because the hon. Member for Havant has already told us that the Conservatives have no intention of reversing the change. He made that clear in an interview in the Western Daily Press, in which he said, "I can't promise it". When he was asked about it by The Observer, he apparently said:
	"Ah, er, erm, it's a good question."—

[Hon. Members]: What is the answer?

Paul Boateng: My hon. Friends may laugh, but we have made some progress: we have gone from "I can't promise it" to "Ah, erm, it's a good question" to absolute silence. The right hon. Member for West Dorset is completely stumm—not a word, not a sound emanates from his lips.
	We are entitled to know, however. What are the Conservatives' plans to help pension funds and to increase savings? First, apparently, they would let pension credit die—their words—despite the help it gives. Just an inkling that they recognise that it has helped more than 2 million people with modest savings would give some indication that the Conservatives live in the real world, in which practical measures such as the pension credit actually make a real difference to people with modest savings. It helps to create a different culture.
	We know that the Conservatives would scrap the state second pension, with the result that millions of carers, disabled people and low earners would lose £43 a week.

Sally Keeble: Does my right hon. Friend agree that the Conservative proposals represent a shift from purse to wallet? Getting rid of the pension credit and the state second pension and putting the money into an increase in the basic state pension would hit women very hard, because only 14 per cent. of them qualify for the state pension through their national insurance contributions, despite the fact that record numbers of them work. Our policies seek to overcome the problem that their pension prospects are defined by motherhood and widowhood.

Paul Boateng: My hon. Friend makes a fair point; she has long championed the cause of women in that regard. She knows that if one is serious about tackling poverty the best thing to do is to put money into the pockets of women. That is the way to tackle family and child poverty. Opposition Members must provide an answer for carers, disabled people and low earners and tell them what will actually happen to them in the absence of a second pension.
	The Conservatives claim that they would introduce a new savings account, yet the right hon. Member for West Dorset has made it clear that he is committed to cuts of about £18 billion across the board. They tell us they will earnings-link the basic state pension, but we have heard nothing about how they would pay for it, and what we have heard is far from convincing.
	We know that the Conservatives want to axe the new deal, but even the right hon. Gentleman has admitted elsewhere that after four years he would have to make some painful decisions in order to fund his commitment. We need some indication about just how painful those decisions will be and where the axe will fall. Who will actually have to pay for that policy? Or does the right hon. Gentleman agree with the pensions commentator who said that returning to the earnings link
	"is not affordable and would not be well targeted"?
	That particular commentator said those words on "On the Record", and now we have them on the record; he is the hon. Member for Havant. To pretend that their policy will not have a cost is disingenuous.
	I have tried to outline a range of measures that we seek to take to deal with the problem. We recognise that that package of measures—about which we have talked during the debate and which includes financial education and access to secure, quality savings vehicles—has to be seen in the context of the overriding imperative of helping people off benefit and into work; to help make work pay and to provide affordable housing. All that would be put at risk if the Conservatives had their way, because they would axe the new deal and scrap the tax credits. They would scrap the very things that make work pay—that move people off benefits and into the world of work.

Sally Keeble: Will my right hon. Friend comment again on the fact that the Conservative programmes would particularly disadvantage women? The child care tax credit has revolutionised things for women; it pays their child care costs so that they can actually have choices about going out to work.

Paul Boateng: My hon. Friend is right. [Interruption.] Ah, that is very interesting. Of course, I give way to the right hon. Gentleman.

Oliver Letwin: The hon. Lady made a very serious intervention about wallets, purses and pensions, and it is something with which we are wrestling, but, on her last point about the child care tax credit, I am afraid that she is completely up the spout. We have made it perfectly clear that we have no intention whatsoever of doing any damage to the child tax credit. [Interruption.]

Paul Boateng: I give way to my hon. Friend.

Sally Keeble: I hope that the right hon. Gentleman will clarify his point about children's tax credit, child tax credit and the child care tax credit because, as my right hon. Friend knows, it is the child care tax credit, which pays about £105 a week for child care costs, not the children's tax credit, that has been so important. If the Opposition are prepared to give that assurance, that is great, and we will hold them to it as we approach the election.

Oliver Letwin: rose—

Paul Boateng: I give way to the right hon. Gentleman.

Oliver Letwin: I am grateful to the right hon. Gentleman for giving way, as it is rare for these debates to constitute a useful purpose, but this is one. What my hon. Friend the Member for Havant (Mr. Willetts) and I have made abundantly clear is that, although we believe that we need to raise the basic state pension and lift people off pension credit, as for the working life tax credits, including all those the hon. Lady describes, we have no plans to remove or diminish them whatsoever. My spending plans specifically provide for them to continue and for current and expected expenditure on them to continue.

Paul Boateng: That has been a very interesting and informative exchange, and I am grateful to my hon. Friend and the right hon. Gentleman for that clarification. It is interesting how the hon. Member for Havant so often lets the cat out of the bag. We look forward to hearing what was said in tonight's much vaunted speech. I am interested in the fact that the Conservatives have gone back on what he said not so long ago:
	"But most of all I want to end the ludicrous tax credit system Gordon Brown has introduced, which was a failed idea from the 1970s."
	The Conservatives have now apparently changed, but I am not the slightest discomfited by that. The right hon. Gentleman said earlier that we might be discomfited by his support. I am not discomfited in any way, but I am very interested in it because it demonstrates the journey that Opposition Members have apparently travelled. We remain unconvinced because we know what their record was. We know that their sums do not add up, and we are determined never again to return to the boom and bust that characterised their stewardship of the economy.
	We have strong fundamentals. We are making great strides towards improving the consumer credit and financial product markets. There is no room for complacency, but we are increasing incentives to save and improving financial literacy, and we have put in place a secure and stable environment to encourage savings. With that record and that assurance, I urge my right hon. and hon. Friends to follow me and my hon. Friend the Financial Secretary into the Lobby tonight, against Opposition Members.

Vincent Cable: I broadly agree with the motion moved by the right hon. Member for West Dorset (Mr. Letwin) and am happy to support it. I am pleased that there has been some recognition of the scale and seriousness of personal debt. I have been banging on about it now for two years and was initially dismissed with some ridicule, so I am glad that it is now being taken further. I take the view that imitation is the best form of flattery. I therefore feel flattered that the right hon. Gentleman has taken up the issue and even more flattered that the Governor of the Bank of England now takes it seriously, too.
	I wish to say a few words about pensions, because the right hon. Gentleman's comments raise many questions about his own proposals, which, frankly, rather worried me. Clearly, his basic point is right: there is a serious, fundamental crisis in the pension system. The data that have emerged in the past week reinforced that view. Statistical evidence shows that average pensioner incomes fell in the last financial year for which data are available—2002–03—because of falling annuity income and falling income from private pension schemes. The average pensioner income is currently falling in nominal terms before taking account of inflation.
	The Office for National Statistics has also produced alarming figures on the collapse in contributions. The initial estimate was £76 billion a year. It is now down to £27 billion. That is the second revision. These are tricky numbers—they are difficult to get hold of—and they may be revised again, but it is clear that, because of the difficulties of occupational pension schemes, there is a collapse in contributions going into the system. All those things are building up difficulties for the future, and many of the explanations that the right hon. Gentleman gave were right, not least the massive disincentives in the benefit and tax system. I accept that the pension credit is a considerable improvement on its predecessor, but the effective marginal rate of tax is still 50 per cent., which creates a massive disincentive to save.
	The right hon. Gentleman's basic conceptual approach on providing a solution to the problem is right, which is getting people out of means testing altogether. However, my mind started to boggle when he came up with what I thought was the proposal that all pensioners should be removed from means testing— lifted above the means-tested level—and have their pensions earnings-linked simultaneously. That is an attractive idea.

Oliver Letwin: I understand why the hon. Gentleman found his hair starting to rise a little. Our proposal is progressively to lift pensioners out of means testing by progressively raising the basic state pension. If he thought I was saying that we would raise the basic state pension first to a level that would get all pensioners out of means testing, and then link it, he was misinterpreting my remarks. We are suggesting their progressive removal from means testing.

Vincent Cable: I thank the right hon. Gentleman for that clarification, which makes his proposals a good deal more affordable. Such changes would have to be very progressive and slow to be remotely affordable. I have done the sums myself, and lifting all pensioners out of means testing would cost about £13 billion a year. The proposals that he advanced on removing the new deal—there are arguments for and against that—and means-tested provisions would not come remotely near to meeting that sum, unless we were talking about a long and slow phasing-in process.

Oliver Letwin: As we seem to be following the tradition of having an interesting discussion, it is worth pointing out that we estimate that our proposals would lift the first million pensioners out of the means-tested benefit trap over the first Parliament. The system would be progressive and thus take some time to achieve its full effect.

Vincent Cable: If that is the case, I think that the right hon. Gentleman's suggestion may be quite similar to our proposals, albeit using a slightly different mechanism. It is possible to move in that direction if we consider a limited group of pensioners. If that is his proposal, it is less sensational than I thought, but more credible. If we want to get all pensioners out of the means-testing system in the long term, we must start to grapple with tricky ideas such as raising the pension age, which the radical pension reformers are talking about. I did not hear the right hon. Gentleman mention that, but such measures must be introduced if we want radical reform. We will have to wait to read the small print tomorrow to find out where this all leads.
	The right hon. Gentleman framed the debate by considering whether there is a problem with personal debt—I agree that there is. Thoughtful interventions from Labour Members challenged whether that was the case and echoed several arguments that have been put forward in the academic community, especially, by people such as Professor Steve Nickell, who is on the Monetary Policy Committee. They ask whether there is a debt problem, so it is useful to rehearse some of the arguments, because although it is not altogether clear that there is such a problem, it is true that on a balance of probabilities, a serious problem is building up.
	There are two key points to consider. The level of personal household debt as a measure of people's income is about 135 per cent. That figure has never been approached in recorded economic history, so we are considering a new phenomenon. People such as Professor Nickell argue that that is fine and that most people are coping with it in practice, as the hon. and learned Member for Redcar (Vera Baird) said. Few people, with the exception of low-income debtors, are defaulting on their debt, so most people are coping. Additionally, people say that the ratio of payments to income is not exceptional. However, that will be true only while interest rates remain close to their current levels, but all the evidence shows that there is now a movement towards significantly higher interest rates—I am not advocating that, but describing what is going on in the world. That is happening in the United States, it will probably happen in the European Union and it is certainly happening here. One need only look at what is happening in the forward markets, which expect interest rates to rise significantly and are factoring that into market expectations. Once interest rates move up by 1.5 or 2 per cent., many of the comfortable assumptions about the ability of debtors to sustain their repayments become very questionable.
	There is another key point of the argument, which was put to me by the Chancellor when I first raised the issue in Treasury questions. We may complain about the debt, but on the other side of the household balance sheet there are some pretty juicy assets, so on paper things do not look too bad. The problem is that almost all those assets are in the prices of people's houses. One can take different views about whether houses are overvalued. Most of us are not qualified to pass judgments on that, but bodies that are technically competent to make such judgments, such as the International Monetary Fund, are extremely worried and are arguing that on most plausible measures house prices are probably 20 to 30 per cent. above what we would expect them to be on some economic test. Many others in the City see the problem as a good deal worse.
	Were the correction to take place, there would be the problem of large numbers of people finding themselves in negative equity, which, as the hon. Member for Luton, North (Mr. Hopkins) reminded us, has occurred before. For those reasons, we must regard the problem seriously; there are high risks. The problem will not necessarily prove unsustainable, but the risks are mounting. The fact that the Governor of the Bank of England and his deputy have been so pointedly clear about the dangers should be a warning to us all.
	What should be done about that in policy terms? What concerns me most is the vacuum of responsibility. When the Government came to office, they made what many of us felt was a sensible decision to subcontract monetary policy to the Bank of England. They also subcontracted regulation to the Financial Services Authority. Those were wise decisions, and the functions have been generally well executed by the bodies given responsibility. However, some big new problems are looming as a result. There are asset bubbles in housing and—potentially—in other things, and big problems of household debt, but it is not at all clear who is responsible for that.
	Are the Government responsible, through the Treasury? Is the FSA or the Bank of England responsible? Indeed, who in Government is responsible for the issue of long-term savings, about which the right hon. Member for West Dorset talked? Is there a Government policy on long-term savings? My hon. Friend the Member for Northavon (Mr. Webb) asked the Financial Secretary some time ago about the mandate of the Government agency responsible for national savings. The answer was that it did not include savings. He was told that it has other roles, but savings was not one of them.
	What has happened in practice, and has happened over the past few weeks, is that the Governor has exceeded his mandate. There is nothing in his mandate that tells him that he is responsible for house prices and personal debt, but he has taken responsibility for that because no one else is doing so and because he can see the dangers. The problem is that he has only one policy instrument: interest rates. The danger of using interest rates to deal with such a scenario is that the British economy will become even more imbalanced.
	One of the key trends in economic performance over the past seven years under this Government has been the extent to which the growth of the economy has been driven by personal consumption. There has been quite impressive and steady growth, but it has been driven by personal consumption and boosted by personal debt. Of the average 2.8 per cent. growth, 2.3 per cent.—about 80 per cent.—has been driven by personal spending. Trade has deteriorated—net exports have detracted from economic growth—and there has been little contribution from business investment. If interest rates are used to deal with the asset bubble in the housing market, the exchange rate will inevitably be pushed up, as the hon. Member for Luton, North pointed out, making it even more difficult to export and to compete with imports, and making investment even less profitable. As a result, the economy becomes even more imbalanced.
	What are some of the other policies that the Government should be considering? I helpfully produced a 10-point plan, and shall make a few suggestions relevant to our debate. First, the Government ought to look at the structure of incentives for savings and investment. It is striking that there is no restraint on borrowing. If I go into a bank, I can see that the walls are covered with advertisements urging me to take out credit cards and additional debts. All the bank employees earn bonuses by pushing out more debt to their customers, but there is little compensating incentive for anyone to invest their capital. Indeed, if someone tries to invest a few thousand pounds they have to go through a complicated process of filling in forms with a financial adviser. Those procedural difficulties have understandably arisen from past mis-selling, but they have resulted in an enormous bias in the incentives system to borrow and not to invest. I hope that the Government, in their review of the Financial Services and Markets Act 2000, will consider and analyse the fundamental issue of incentives. Is there over-regulation of investment and under-regulation of credit provision?
	Secondly, I urge Ministers to consider the important but neglected issue of payments insurance. If large numbers of people get into difficulties with their mortgage—they might not, but they might—insuring their payments will be an important safety net. There is a market for payments insurance, but it is unsatisfactory. The margins are enormous, it is provided by a handful of brokers and banks, and it is not taken up by most people. There is a lot of mis-selling— the institutions that promote the mortgages also promote the insurance—and there is little genuine competition. It is a classic example of something that calls for Government intervention—the Office of Fair Trading needs to look at the market and make sure that it works better—so I hope that they are persuaded to take an interest in it.
	Thirdly, the right hon. Member for Hamilton, North and Bellshill (Dr. Reid) has touched on the issue of debt distress and people who are affected by loan sharking and comparable activities at the bottom end of the market. The paper produced by the Department of Trade and Industry makes some sensible suggestions, but the process of implementing them is slow, so it would be helpful if the Financial Secretary told us when they will come into effect. For example, there are sensible recommendations about stopping the ludicrous practice of penalising people for making early repayments, which would do a great deal to change the culture and encourage people to adopt a more prudential approach to personal finance.
	Finally, to expand a debate that I had with the Financial Secretary about 18 months ago, the Government should develop their initiatives on financial advice—a subject in which she takes a personal interest. It should not be impossible to get the industry—the banks, insurance companies and so on—to set up, through a small levy, a national system of genuinely impartial personal advice. At the moment, it is difficult to get independent financial advice, because most advisers are tied to the industry, and the polarisation changes do not make their position any easier. A system of genuinely independent financial advice centres dealing with people before they get into difficulties, not afterwards, would go a long way towards easing people's anxieties before they enter into major financial contracts. The Government want to develop such proposals, but I can see little evidence of their doing so. Perhaps the Minister can reassure us that progress has been made on that agenda.

Tom Harris: I welcome the opportunity afforded by our debate to discuss personal debt and savings, a crucial quality-of-life issue that affects all of our constituents and probably every Member of Parliament. When things are going well and we have plenty of money—we have more savings than debt—everything in the garden is rosy. When, however, we cannot cope with personal debt, lives and marriages start to fall apart, which has a huge negative impact on wider society. It is therefore entirely appropriate to debate the matter this evening.
	The Government have created a climate in which people feel secure about their finances. When interest rates are at an historic low, inflation is low and unemployment is low, it is inevitable that people feel a little more secure about taking out personal loans and credit cards. That is even more the case when they realise that the value of their house has increased substantially since they bought it, perhaps only a short time ago. In those circumstances, people will inevitably get into personal debt that they can manage.
	That is a fact of life and we should not necessarily be afraid of it, but the corollary is that when unemployment is high, interest rates are high and inflation is high, as happened under the previous Conservative Government, absolute personal debt may be lower, but the ratio of personal debt to personal income is much higher. As my right hon. Friend the Chief Secretary to the Treasury said, that ratio is about half of what it was eight or nine years ago. It is now about 7.5 per cent. Although personal debt in this country has gone up, I believe, to more than £1 trillion, the crucial point, which we should welcome, is that that is largely manageable debt, compared with what it was in times of recession.

Norman Lamb: I accept that the ratio of repayments to income is significantly different from what it was in the early 1990s, but does the hon. Gentleman agree that the trend is very much upwards? Many people predict that we will return to ratios similar to those in the early 1990s.

Tom Harris: There is no denying that recently the trend has been upwards, but I am not convinced that it will become as unmanageable as it was in the middle to late 1980s, when the country was in an interest rate crisis. Thanks to the Government's economic management, interest rates are historically low. The hon. Member for Wycombe (Mr. Goodman) on the Conservative Front Bench smirks at such a statement. It is bizarre that Conservative Members cannot admit that interest rates are now a fraction of what they were in the 1980s and 1990s.

Desmond Swayne: I appreciate that the amount of debt to which people are exposed is much larger, as the hon. Gentleman says. Interest rate sensitivity is therefore much greater. A relatively small movement in interest rates—much smaller than in the period he refers to in the late 1980s and early 1990s—will have a disproportionate effect on disposable incomes. For example, a 2 per cent. increase in interest rates could leave people paying a quarter of their disposable income in interest payments.

Tom Harris: The hon. Gentleman is right. A 2 per cent. increase in interest rates would effectively be a 25 per cent. increase in payments. Interest rates are low, so it is inevitable that a small increase has a proportionately bigger effect than in 1989, for example, when interest rates went up from 11 to 12 per cent., which was an increase of only one eleventh.

Paul Goodman: I apologise to the hon. Gentleman for smirking, as he put it. I was merely recalling that in the early 1990s, our membership of the exchange rate mechanism was supported by the then Government, the Labour party, the Liberal Democrats, the CBI, the TUC and the Church of England bishops, as far as I know—indeed, by everyone.

Tom Harris: That was before my time. All I remember is that I was encouraged at the time by the reassurances of the then Prime Minister, John Major, to take out a five-year fixed-term mortgage on my new house at 9.9 per cent. one month before September 1992, and for the next five years was paying substantially more than I would have been paying had I ignored the advice of the then Prime Minister.
	The point I want to make is not partisan and has not been referred to in the debate so far. On a number of occasions in the Chamber I have fulminated against the instant gratification society and blamed it for all sorts of things. It is informative to bring up the subject in this debate. We are all bombarded day in, day out with images of stuff—possessions, designer labels, new cars and houses—in advertising, on television, the internet and radio and in newspapers. Some people who see pictures of David and Victoria Beckham in the newspapers may want to buy clothes of whatever designer label the couple is wearing, from shoes to sunglasses. On some of the cable channels, such as E4 or Granada Plus, almost every single advert is for a personal loan. If it is not for a personal loan, it is for insurance.
	It is hardly surprising that when children, who are subjected to such images of the fantasy lifestyle that we are told we can pick up off the shelf, find on leaving school that they do not have the income to buy into the lifestyle that they have been told by the media for many years that they can achieve, they take out loans and get credit cards or store cards. If they want to buy something, the idea of saving for it is anathema; it is an unknown idea. If somebody wants something, they get it. How do they get it immediately? They take out a loan. That is the culture in today's Britain. That is how we are being told to live our lives. There is no suggestion that we should ever save up to buy anything. We are always told, "Buy it now, as you can have it now; simply take out a loan." That is not a healthy attitude for us to adopt.
	At the end of last year, the Government produced a White Paper, "Fair, Clear and Competitive", looking at reform of certain aspects of the consumer industry. I want briefly to refer to four suggestions in the White Paper, one of which has been mentioned by the hon. Member for Twickenham (Dr. Cable), who referred to the ending of punitive penalties levied in the event of a borrower wishing to pay off a loan early. Sadly, the practice continues whereby banks and lenders put all the interest for a loan up front, even if it is a three or four-year loan, so that in the first six months or so when one is paying it off, one makes no impact on the capital. If somebody feels after six months that they can pay off the next two and a half years of the loan, they will find that they have to pay off all the debt, and that all that they have done so far is pay interest. That appalling practice takes a number of people by surprise who find themselves in the lucky position of being able to pay off a debt early.
	The White Paper proposes that the rules on advertising should be changed to ensure, for example, that the annual percentage rate offered by a particular company has more prominence than other information about that company. That will be welcomed by anybody who wants to make a genuine comparison between the different products on offer. Another proposal is to introduce a standardised way to calculate the APR. Thank goodness for that. If a gun were put to my head and I was told to explain how an APR was calculated, I could not do so. When the White Paper was published, I was astonished to find that there is more than one way of calculating the APR. I cannot understand how the industry has managed to survive to date without a standardised form of APR, and I am delighted that the Government are now looking at ways of standardising it.
	All those proposals will be especially welcomed in my constituency. In Castlemilk, for example, there is a shop that has, for many years, put on sale products and advertised hire purchase agreements with extortionate interest rates that are well beyond what anybody would expect even from the most notorious store card. It advertises those rates of interest not because its target audience and clientele can afford to pay them, but because it knows that they cannot afford them and that there is money to be made from getting people into debt to the point at which they cannot afford the repayments. For the sellers, that can often be a win-win situation, but for the ordinary people who are trying to make the payments, it is almost always a lose-lose situation. Another example, which a constituent brought to my attention, recently appeared in a local paper in Glasgow. It concerned a company that sold second-hand personal computers, and the repayments on its loans were structured to attract people who would not normally obtain credit from outlets such as PC World to buy a brand new computer. Such people prey on the most vulnerable and poorest people in our society, and I am glad that the White Paper will combat that practice.

Vera Baird: My hon. Friend's reflective speech makes me think what a bind such companies get ordinary people into. He made the strong point that the charges for paying off a debt early are onerous, but one also incurs onerous charges if one makes a late payment. If one does not toe the consumer credit companies' line, one gets oneself into deeper and deeper debt.

Tom Harris: My hon. and learned Friend is right. We could have a full day's debate on the various sharp practices used by banks and lenders, and perhaps we will have such an opportunity. Banks are not slow to penalise people for making late payments, but they are not particularly quick to come forward when they make a mistake—but that is a separate debate, Madam Deputy Speaker.
	Many people do not save enough, and far too many people save nothing at all—I suspect that it has always been thus, and it has certainly been thus in recent history. The Opposition blame the Government for those ills.

Desmond Swayne: Quite right.

Tom Harris: The hon. Gentleman is a partisan fellow, and he has his opinions. It is difficult for the Conservative party to blame the Government unless, of course, it turns a blind eye to some salient facts: it is difficult to cope with a large debt if interest rates are 10 or 11 per cent., as they were under the Conservative party; it is difficult to cope with a large debt if unemployment is more than 3 million, as it was under the Conservative party; and it is almost impossible to manage a large debt if inflation is in double digits, as it was on a number of occasions under the Conservative party. This Government have done more than any previous Government to encourage people on middle and low incomes to save, and they have done more than any previous Labour or Conservative Government to provide economic circumstances in which saving is not only a financial necessity, but a bonus that allows people to prepare for the rest of their lives.

Mark Hoban: The debate is important, and I support much of the analysis outlined by the hon. Member for Glasgow, Cathcart (Mr. Harris).
	It is easy to be puritanical about increased consumer debt, which is approaching £1 trillion. It is also easy to criticise people who take out store cards, credit cards and personal loans, but who can blame those people when some of today's circumstances encourage them to do so? Factors such as low interest rates on savings and rising house prices lead people to ask, "I have got more money and more wealth; how can I best use that wealth?" However, the seeds of economic uncertainty for not only individual households, but the economy as a whole lie in the sense of increasing affluence and the ability to service higher debt, which is the point that I want to discuss this evening.
	Hon. Members from both sides commented that lower interest rates allow people to service greater debts, and households are gearing their debt to reflect the lower cost of servicing it. The debt-to-household-income ratio is 140 per cent., which is one of the highest levels ever. People can service that debt at the moment. They are gearing up—borrowing more—because of the low interest rates.
	People are optimistic about their future; they are prepared to continue to take on extra debt if they believe that the economy is stable, that they will stay in employment for the foreseeable future and that interest rates will be low. Moreover, if they sense that their personal wealth is increasing, they will start to borrow more. Equity in a house was previously viewed as an intangible asset that was difficult to realise without selling the house and downsizing; nowadays, it is realised in many different ways. My right hon. Friend the Member for West Dorset (Mr. Letwin) cited the increased use of retirement income schemes, which take out equity from a house to provide income for retirement. That was also mentioned by my hon. Friend the Member for New Forest, West (Mr. Swayne).
	Another factor in the rise of the borrowing culture is the decline of the savings culture. Returns on savings are low. The FTSE 100 has barely moved during the past seven years, whereas stock market indices in other leading economies have gone up. We have already heard about the £5 billion raid on pension funds. We must also consider the rigidity of certain savings products: for example, it is very difficult to access one's pension fund before retirement; and if one takes money out of an individual savings account to meet a short-term financial crisis, one loses the tax relief on one's savings.
	Some people are having to shoulder higher levels of debt at the start of their career. I do not wish to make partisan points about the level of student debt, but it is clear that top-up fees will saddle students with more debt that they have to pay off over a longer period, so they will not have the free cash available to put money aside for a pension or to save for the deposit on a house. The pension credit has a particular effect on tomorrow's pensioners' incentive to save.
	On current returns, the structure of the savings market encourages people to borrow money instead of saving for the future. That sows the seeds of several economic problems. First, strong borrowing for personal expenditure adds to the volatility of the economy. If people perceive the economy as continuing to grow, they will continue to borrow on the assumption that their income will increase in future and they will be able to service the debt from it. One of the Bank of England's most recent inflation reports included a very good chart that showed the strong correlation between the increasing level of equity withdrawal from houses and household consumption: as people took more equity out of their houses, they spent it on a new car, a holiday, or a new kitchen or bathroom. People have started to borrow out of their principal asset—their house—to fund future consumption. Once they start to lose confidence in the future of the economy, they will borrow less, and consumer expenditure, which has been one of the main drivers of the economy over the past few years, will start to come under pressure.
	Secondly, people have re-geared their debt to reflect low interest rates, which mean that they can afford to borrow more. Because of the significant increases in house prices, people borrow ever-higher multiples of their income in order to be able to afford to buy a new house. When I first bought a house, the maximum multiple was three times one's salary; now it goes up to four or five times one's salary. Such a high level of borrowing increases the volatility exposure of households to high amounts of debt. My hon. Friend the Member for New Forest, West expressed that eloquently in an earlier intervention. If interest rates are 5 per cent., a rise of 1 per cent. would increase the interest cost by 20 per cent. If interest rates are 10 per cent., a 1 per cent. rise would increase the debt service cost by only 10 per cent.

Tom Harris: Perhaps I did not address that point fully when the hon. Member for New Forest, West (Mr. Swayne) raised it with me. Although an increase of 1 per cent. is a large proportional increase, does the hon. Gentleman accept that the actual net increase in pounds per month would be exactly the same as the increase if interest rates were even higher?

Mark Hoban: The hon. Gentleman needs to be careful because although there is an interest rate, we should not forget that people are also borrowing more. A repayment element therefore needs to be taken into account. Borrowing more means repaying more as well as paying slightly less in interest.

John Gummer: If one borrows when interest rates are low and house prices are high, without considering that house prices might not continue to rise but that interest rates could, one finds oneself absolutely out of kilter. That does not happen if house prices have ceased to increase so quickly or interest rates have been reasonably high for some time and one has made a decision in the context of high interest rates. It is a question of when one makes a decision and in what context.

Mark Hoban: My right hon. Friend makes a powerful point. People who borrow when interest rates are high benefit significantly when they fall. Much of the increase in disposable income is a consequence of that. When the reverse happens, and one borrows on the assumption that low interest rates will continue for some time, but they rise significantly, disposable income, after taking account of interest payments, begins to diminish. Such matters lead to volatility starting to creep into the economy. People gearing up debt present a risk to both their personal finances and the economy. As people increase the amount of interest that they pay on their debt, they will be forced to reduce their personal consumption to keep their books balanced, and that will have an impact on the wider economy.
	The deputy governor of the Bank of England summed up the matter neatly when he said in March:
	"Since there are, at present, relatively high levels of debt and these are rising faster than income, it is likely that potential vulnerabilities from increased gearing are rising . . . And we know from experience that unexpected shocks from one source or another can upset individuals' predictions and behaviour."
	My right hon. Friend the Member for Suffolk, Coastal (Mr. Gummer) referred to those shocks when he mentioned the changes in the economy that force up interest rates. We should be mindful that we are considering not only straight economics but people's lives and that personal debt has a huge impact on all our constituents.
	In my constituency, the citizens advice bureau said that, according to its referrals, in 2002–03 the average debt was approximately £11,500, whereas in 2003–04 it was £17,000. That shows some of the vast personal debt that people are incurring. We are therefore presented with a difficult position and the hon. Member for Luton, North (Mr. Hopkins) picked up on that when he probed Government and Opposition Front Benchers about interest rates.
	The Monetary Policy Committee of the Bank of England is in a difficult position. Interest rate increases are significant and could lead to a hard landing for the economy as people cut their spending to meet high borrowing costs. Small increases in interest rates, however, might not send the right signals to consumers, and the house price increases might continue, forcing people to borrow more money so as to be able to afford a house. A difficult dilemma faces the Monetary Policy Committee; it has to get the interest rate right both in terms of controlling inflation in the short term and in regard to the longer-term implications for house prices, consumer debt and the long-term structural stability of the economy.
	One might ask what the Government are doing in this regard. In an interesting article published last month, Ros Altmann, a Government adviser on pensions, wrote:
	"The UK economy's remarkable recent performance has been supported by a housing boom and government spending on job creation in the public sector. Is this all part of the Treasury's plan? Rising house prices have a positive wealth effect, increase consumer spending on housing-related items and fuel sharp rises in borrowing, all adding to short-term economic strength."
	That is the view of someone who advises the Government.
	This is how we come to understand the nature of the economy. If we continue to fuel short-term growth—and as long as the economy continues to grow, and interest rates and unemployment remain relatively low—borrowing may well be sustainable. However, we cannot rely on a positive view of the economic outlook by the Government. Steps have to be taken to introduce stability into the economy. That is why we need stronger incentives for saving, not only for retirement but for the pre-retirement period. We also need less rigidity in the savings products that are available and encouraged by the Government, if we are to encourage more people to save. If we do not have the counterbalance of savings in the economy, the threat that borrowing poses to the stability of the economy in the medium to long term is significant. That is a challenge that the Government have yet to grasp, but my right hon. Friend the Member for West Dorset demonstrated in his opening speech that the Conservatives certainly have grasped it.

Vera Baird: A generation ago, Britain was a country in which debt carried a stigma and borrowing was known as living beyond one's means. Now, however, personal borrowing has risen to £1 trillion. There has been a profound cultural change, and the key to that is our affection for home ownership. As many hon. Members have said, 80 per cent. of the £1   trillion consists of mortgage borrowing, but the impact of the housing market boom goes much wider than the headline figure. Many people have seen the value of their home double in the last five years. People who were never asset-rich before have become so, probably faster than at any time in history. At the same time, with low interest rates, low inflation and low levels of unemployment nationwide—although not throughout all the regions—it is cheap to borrow.
	Low interest rates also fuel the notion that it is not profitable to save. I have never been entirely sure whether that is right, because inflation—which fuels higher interest rates—makes savings look attractive, but if they are fuelled by inflation, their benefits are wiped out. However, it looks as though it is not worth saving at the moment, and that illusion is widespread. Lenders, too, have obviously become—let us put it generously—flexible, but as long as everyone agrees that credit is being used as a tool for financial flexibility in a manageable way, it is part of economic growth. It creates employment in the service sector and contributes to gross domestic product, and our economic performance has outshone that of France and Germany recently.
	I listened to a commentator from Ernst and Young on the BBC recently. I was impressed that the hon. Member for Twickenham (Dr. Cable) gets his views from professors; I listen to the BBC. That is the best I can do. The spokesperson from Ernst and Young made it clear that, without the explosion in borrowing, UK growth rates would have been much lower, the UK economy would have been much smaller, and the corporate sector would have been less profitable. There would also have been fewer jobs without the impetus of personal borrowing. There seems to be consensus among financial commentators at the moment that people are in the main still servicing their debt reasonably comfortably because of low interest rates, but I accept that, as hon. Members on both sides have pointed out, it does not take much of an interest rate change for that to become a problem.
	However, there is an historical point. Capital Economics, quoted in a Money Observer article that I read recently, cited the fact that from the late '80s, long before economic gearing started to peak—we have talked about the levels of economic gearing tonight—people in households took action to cut their debt. It has been shown that the recent increases by the Monetary Policy Committee are having an effect on mortgages. Secured lending rose by only £8.5 billion in May, which is the lowest increase for nine months and down from an increase of £9.2 billion in April. So, one hopes that people are reading the signs as they come and that there will not be any real developing crisis.
	A MORI Market Dynamics poll recently referred to the fact that thousands of pounds of credit card debt are in the hands of people it calls convenient controllers—that is, by and large, people who cope with paying off their balance every month. Only about 5 per cent. of card holders are classified as spiralling debtors with large debts relating to their income. It is right to point out, however, that the Consumer Credit Counselling Service says that 5 per cent. represents an enormous number of people. With 61 million credit cards, that is likely to be true.
	I want to point out some oddities that presented themselves to me in recent days as I reflected on this debate and which have perhaps pushed people towards borrowing rather than saving.

Tom Clarke: My hon. and learned Friend's analysis is absolutely correct. One wonders whether Opposition Members are amazed, and even perplexed, by the fact that the figures she has given on inflation, interest rates and the rest have all been achieved under a Labour Government. Perhaps it is difficult for them to come to terms with that.
	On the specific issue of credit cards, does my hon. and learned Friend agree, on the basis of constituency experience, that many people are deeply worried about the increase in credit card fraud? Therefore, should we not quite properly be addressing it?

Vera Baird: My right hon. Friend is correct. People are very concerned about credit card fraud and about identity theft, which can go beyond credit card fraud. It is a most serious issue indeed. There are, of course, steps that the Home Office is countenancing now to try to make clearer what people's identities are in the hope of at least partly combating that issue.
	May I return to credit cards specifically and some oddities between pressures that push people towards saving or push them towards taking credit? A number of people have said to me in the last few days that having a savings account in a bank for several years does not help a person to get a credit rating—particularly not a young person, apparently. Getting a credit card does help a young person to get a credit rating.
	In addition, people who go to buy a car in cash are told that they should borrow the money if they want a discount, because cash purchases are no use to the salesperson. Discounts are available only for credit. I recall that there used to be discount for cash, but it seems that the clear message now is that there is no point in saving up for a car because people who do so will not get as good a ticket price as they would if they borrowed the money.
	Whether those factors play a role it is hard to know, but it is hard to suspect that they do not. Of course, inequity has come into play. The pattern is that the lower the person's income, the higher the interest charged, together with, as my hon. Friend the Member for Glasgow, Cathcart (Mr. Harris) said, penalty charges for being late by a day and penalty charges for paying debt back a few days early.
	Over-indebtedness is a real problem for people on low incomes and it can result in significant costs—health problems, depression and deterrence from moving into better employment leading to homelessness. There are 3 million households in arrears with credit repayments on household bills and problem debt is primarily concentrated in low-income and other socially excluded groups. For example, 57 per cent. of over-indebted households have an annual income of less than £7,500.
	Of course, low-income groups also experience the most directly serious debt—priority debts—such as utility and council tax bills, which are likely to result in eviction, imprisonment, disconnection or repossession. High repayments also leave people with little disposable income. According to the Office of Fair Trading family expenditure survey, in this day and age, 5 per cent. of the poorest decile spend 90 per cent. of their income servicing debts.
	The debt problems of the lowest group are not caused primarily by irresponsible money management. Mostly, people on low incomes have reasonably sophisticated budgeting skills—I suppose that, by necessity, they must have. In most cases, initial triggers for debt are life events: losing a job, moving in and out of work, separating, becoming ill, developing a disability, having children, or being on a long-term low income. One in five households in arrears or financial difficulty attributes it to redundancy, and one in seven people cites living for long periods on a low income as the cause. Those are the kinds of people whom Redcar citizens advice bureau deals with. Last year, 42 per cent. of the 23,500 issues that came before it related to debt, and it has dealt with approximately £2.5 million worth of debt.
	In addition, the community legal service partnership in Redcar has found a high need for debt and money advice in the borough. It now has a money advice worker who has dealt with 100 clients over the past financial year and debts totalling about £1 million. Apparently, the average debt is around £10,000, and that partnership too finds that the reasons why people get into debt tend to be life events and not mismanagement. It points, however, to a number of features that exacerbate the situation—for example, the fact that debt is easily accessible. In particular, once into debt, people get another debt to pay off the last one, and again and again.
	Problems are apparently encountered with the commercial side of debt advice, in which individuals tend to be recommended to consolidate their debts into a personal loan, which will have "a lower interest rate", but which will go on for very much longer, and therefore, in the end, be very much more costly to service. In particular, people get talked into secured personal loans, which will not only increase the amount that they will have to pay back over the years but put the roof over their heads at risk if they are unable to make the payment. I was shocked to find that there are commercial debt counsellors who charge for debt counselling. I was completely unaware of that. Happily, free services are provided through the CAB and National Debtline, although it is a moot point whether those are sufficient.
	A further problem is that 41 per cent. of adults on Teesside have numeracy and literacy problems, which feeds the problem. People do not understand contracts, do not know how to choose the best deal, and do not understand what APR is, although, as my hon. Friend the Member for Glasgow, Cathcart (Mr. Harris) said, which one of us does? Furthermore, they do not know what the term "interest free" may mean, as, again, many of us do not. Addressing adult numeracy and literacy problems will help people to have greater financial understanding. Redcar CAB does some proactive work in schools and at Sure Start venues, where it tries to teach people how to avoid debt from as early as 15 or 16 years of age, which, I would imagine, is the type of work that the Government would like to encourage even further.
	I want to mention only two things that the Redcar CAB and the welfare advice department are concerned about, because their effects are capable of making matters worse. Under changes to income support from January 2005, no amounts will be provided under it for children, and claimants will be moved on to child tax credit to support their children. That means that some people will be lifted off income support, even though they will not get any additional money paid to them. As a result, they will stop being passported through to the social fund, although budgeting loans and community grants are important to enable people to buy large items that wear out, such as washing machines. The question is: if people are no longer able to access the social fund, what will that do to families who are currently struggling and just managing to hold off debt? In addition, the new working tax credit, which of course aims to help low-income workers with children, is perhaps a tad unresponsive to changes in the household, such as someone going sick, or someone leaving the household, as it is based on the last year's income. Many people in the Redcar area who suffered overpayments through no fault of their own are having to repay from this year's award.
	I know that the Government, who are very concerned about these issues, will want to consider those two potential problems, and decide whether they are likely to have an impact or whether there is already a solution to them.
	I do not believe that the current levels of borrowing constitute a crisis, or are seriously damaging at the moment. I think that we can take it easy in the short term, although we must not be complacent. For a narrowing band of society, however—the poorest—there is a serious debt problem, and where debt has its impact in that sector it is very severe.
	Let me say a quick word about pensions. If the basic state pension were increased to pension credit level, that would do no good to the 87 per cent. of women who have no basic state pension. Their pension credit would be wiped out pound for pound. It would benefit only the more affluent pensioners whose savings take them well above pension credit level, most of whom receive occupational pensions. That would clearly be regressive in terms of income distribution, but above all it would be deeply sexist.

Oliver Letwin: What does the hon. and learned Lady make of the 1 million pensioners who are entitled to pension credit and do not take it because of its awesome complexities—including, of course, many hundreds of thousands of women?

Vera Baird: As I am sure the right hon. Gentleman knows, the figures show an improvement in take-up of pension credit. He must also know that the application forms have been made much more strikingly similar to others. The Pension Service's telephone responses are being praised by all those in my constituency—I have mentioned them—who help elderly people with means problems. The right hon. Gentleman is barking up the wrong tree.

Tom Harris: If some pensioners believe that the forms are too complicated, might that not be at least partly because every time a Conservative MP goes on television to talk about pension credit he or she never misses the opportunity to perpetuate the myth that they are far more complicated than they are?

Vera Baird: My hon. Friend makes a powerful point. It is time the Tories stopped saying how hard it is to obtain pension credit, and started to encourage a few more elderly people to claim it.
	I hope the right hon. Gentleman takes my point that his proposals to alter the basic state pension are profoundly sexist, and will certainly not appeal to female voters.

Paul Goodman: The hon. and learned Lady overestimates our influence if she believes that we are responsible for the present non-take-up rate of pension credit, which is 40 per cent.

Vera Baird: I would not dream of overestimating the Opposition's influence. I do not believe that they have a great deal of influence, or that they have exercised much of it tonight.
	I look to the right hon. Member for West Dorset to explain how it is possible to advocate what he has advocated tonight in regard to basic pension increases without being profoundly sexist, as well as redistributive in a regressive way.

John Gummer: I refer the House to my declaration of interests, and particularly to my independent chairmanship of the Association of Independent Financial Advisers.
	I wonder how we have managed to talk about mortgages for a whole evening without mentioning the shortage of homes. There is another issue besides the price of a mortgage—the issue of supply and demand. One of the reasons why house prices have risen so sharply is the Government's failure to ensure that enough homes are built, and enough land released on which they can be built. But we in this House must be careful not to take the doom and gloom view that everything is bound to get worse, nor to adopt the unbelievably self-congratulatory attitude of the right hon. Member for Brent, South (Mr. Boateng), who introduced the Government's case. There ought to be something in between, and that is what the Opposition are trying to underline.
	The simple point is this. It is not surprising that concern exists if the very high level of debt is based on the belief that interest rates will for ever remain low, or if such debt is being forced on people because of a shortage of homes, and they are pushing up the proportion of income that they are prepared to risk in such circumstances, simply to get a roof over their heads. Such concern is indeed what the Opposition are expressing. In doing so, we are not being party political, for this is precisely the concern that the Governor of the Bank of England has expressed, as have many independent and largely left-leaning commentators.
	Our concern is increased because of the Government's complacency. Have they read their own alternative motion? It is the most self-congratulatory and complacent statement of the situation that one can possibly have read—a fact that should concern us all. The second worry is that huge disagreement exists within the Government, with the Chancellor on one side and a whole range of people from different elements of the Government on the other. This is, after all, a Chancellor who is at odds with the Governor of the Bank of England. This Chancellor thinks that he can do better at solving the housing problem than the Office of the Deputy Prime Minister. Most people think that, but this is a very curious situation. Two major offices of state have publicly announced different ways of solving the housing problem, and both are pushing forward their ideas in total contradiction of each other. The Chancellor has also fallen out with the Department for Environment, Food and Rural Affairs over how we are to deal with housing and planning issues.
	All those issues feed into the considerable concern that we must feel at the fact that the level of debt is based on the Micawber-like principle that everything will be okay because interest rates are not going to rise. Well, they will not rise very fast, but I certainly do not want this nation to be dependent not only on interest rates not rising, but on the value of houses not falling—for that, too, is a major issue. I doubt whether there will be a collapse, but it will be avoided not because of the Government's management of the economy, but because of the shortage of houses. There is now huge pressure on the system in terms of supply and demand. Some 58 per cent. of the new homes needed are needed by those whose marriages have broken up. The deposits that such people can put down are significantly larger than those that first-time buyers can put down. Such factors complicate the situation, but the Government have not properly considered them.
	I would not be proud of a record that shows that per capita wealth in Britain is now lower than that of the Irish, much as I like and am enthusiastic about the Irish, and much as I am pleased that the European Union has improved Ireland's economy, as it has done in many other cases. That is a great achievement that Britain never managed, and it is another good reason why we should be extremely pleased to be part of that organisation. But it is important to point out that this Government do not make that comparison, and the reason why is that they have presided over an economic policy that has made it more difficult for business to thrive, thanks to the restrictions that they have placed on it. Nor would I be enthusiastic about defending a savings rate as low as we see today.
	It was difficult to follow the Minister's argument, because he essentially said, "We have done this, that and the other, and we have done more and extra, to try to encourage saving, but people have ceased to save." We have done everything for them, and we have a wonderful committee—on which I sit with the Financial Secretary—to educate people, but the savings ratio continues at a very low level. Indeed, it is much lower than it safely should be.
	I return to the point made by my right hon. Friend the Member for West Dorset (Mr. Letwin). A society that does not have a relatively high savings ratio and in which savings—large and small and across the social structure—are not considerable in proportion to the assets and earnings of individuals is a society that in the end destroys its own cohesion. A safe society is one in which each individual has a real stake in their future and knows that when they save they are contributing to the improvement of that future. A society that makes it better not to save is a society that removes from people that important social asset of a commitment to order, progress and security. Societies that have ignored that have ended up in political disorder, have destroyed their progress and have removed their security. History is a hard teacher on that issue, and this Government have done much to undermine this society.

Paul Goodman: That was a very fine speech by my right hon. Friend the Member for Suffolk, Coastal (Mr. Gummer). It was a fine contribution to what has been a good, serious and reflective debate. It is worth saying that debt is not always bad, and indeed that point was made by my hon. Friend the Member for Fareham (Mr. Hoban). Firms must often borrow to invest and people must often borrow, for example, to improve themselves, their homes and their lives. None the less, the facts on debt are extremely worrying, and the hon. Member for Twickenham (Dr. Cable) made a fair attempt at trying to establish just how worrying they are.
	Lending to individuals has almost certainly now broken through the £1 trillion barrier, so it has soared. The facts in relation to saving—a point on which my right hon. Friend the Member for West Dorset (Mr. Letwin) dwelt at some length—are alarming. Between 1998 and 2003, the savings ratio was never higher than 6.7 per cent. In the previous seven years, it was never lower than 9.3 per cent., so saving has fallen sharply. It is around the two polarities of debt and saving that this debate has turned.
	According to the family resources survey, 27 per cent. of households have no savings at all and a further 23 per cent. have savings of less than £1,500. The Bank of England's chief economist has noted that the gap between what British households should be saving to ensure a comfortable retirement and what they actually save is £27 billion a year. Unsecured personal debt is now £172 billion, or more than £500 a person. What does all that mean for homeowners and for the vulnerable? The latter group includes some homeowners, but of course not by any means all of them.
	According to the Council of Mortgage Lenders, a household with average earnings, average mortgage and average levels of unsecured debt now uses 34 per cent. of its income to service that debt. According to Capital Economics, a 1 per cent. rise in interest rates would take the gearing on that debt to just over 24 per cent.; a 2 per cent. rise would result in households paying just over a quarter of their income in servicing debt; and a 3 per cent. rise would raise that figure from a quarter to 28 per cent. Indeed, as we have heard from the Governor of the Bank of England, house prices are
	"well above what most people would regard as sustainable in the longer term".
	The trend of rising interest rates has the potential—I put it no more strongly than that—to damage the lives of millions of homeowners who would be hit if the Government won a third term, a prospect that is looking increasingly unlikely given the damaging combination of interest rate rises and Labour's third term tax rises, to which my hon. Friend the Member for Fareham alluded. Of course, there is always the risk of the transfer of debt to the next generation.
	None the less, I want to assume, for the sake of argument, that the Council of Mortgage Lenders is right to say that
	"current . . . levels of debt are clearly an issue, but they are not as dramatic in the secured sector as in the unsecured sector".
	I want to assume that the council is right, because although most home owners may be able to endure the debt culture, there can be no doubt that the poor and the vulnerable—a group that includes some home owners—cannot endure the debt culture. That group of people is losing out, as the hon. Member for Glasgow, Cathcart (Mr. Harris) reminded us in his interesting speech, so I shall turn to their plight.
	The debt to income ratio is highest in the poorest households; it doubled between 1995 and 2000. Forty-two per cent. of families with a new baby are in arrears, as are 48 per cent. of lone parents and 53 per cent. of recently separated couples. Over the last five years, inquiries to citizens advice bureaux rose by 46 per cent.
	The Council of Mortgage Lenders said:
	"There are some signs of financial pressures building in the unsecured sector. Recent trends in consumer credit appear to suggest that the debt position of a significant minority of households leaves them vulnerable to default."
	We believe that the Government's White Paper does nothing substantial to help that group. It does not address the growing failure of people to save. It does not address the growing problem of the debt culture and it contains no significant proposals on education, savings or alternative sources of finance. As my right hon. Friend the Member for West Dorset said earlier, that is why the Conservative party has set up a commission to report on debt and savings. The debt commission will be independent of the party and will report later this year. It will be chaired by the distinguished figure of Lord Griffiths of Fforestfach, who was of course head of the Downing street policy unit when Baroness Thatcher was Prime Minister—[Interruption.] Before Labour Members work themselves into paroxysms of wrath, I remind them that Lord Griffiths is an adviser on third world debt to the Chancellor of the Exchequer, so they should not laugh too loudly, because the Chancellor, who is a very influential man these days, as the right hon. Member for Hartlepool (Mr. Mandelson) reminded us recently, might hear them. The members of the commission include the Right Reverend James Jones, the Bishop of Liverpool and Keith Tondeur, the national director of the money education charity, Credit Action.
	The commission is charged with finding ways of relieving the debt burden and of reviving the savings culture and will examine ways of improving education and saving. However, we do not believe that the Government have to wait for Lord Griffiths before acting to slow the debt culture and to revive a savings culture, because one fact is clear: there will be no savings culture if three quarters of all pensioners end up on means-tested benefits, and that is exactly where we are heading. Half of all pensioners are already on means-tested benefits. By 2025, three quarters of them are expected to be on means-tested benefits. In short, 4 million pensioners will have to reveal all the details of their personal financial circumstances to a Government official so that he or she can determine the total income they should have.
	Means testing not only increases dependency and decreases dignity but also destroys saving. The Government's mania for means testing is throwing their pensions strategy into chaos. Ministers have declared that they want to shift the pensions balance; they want 40 per cent. of pensioners' incomes to be funded by the public sector and 60 per cent. by the private sector. When they came to office, those figures were almost the reverse: 58 per cent. were funded by the public sector and 42 per cent. by the private sector. Since then, the shift has been not from public to private but from private to public.
	The percentage of pensioners' incomes funded by the public sector has risen to 61 per cent. while the percentage funded by the private sector has fallen to 39 per cent. The pensions industry cannot plan while the Government say that they want to decrease state dependency yet act to increase it. People will not save if the shift to means-tested benefits penalises them for saving. The Government are unwittingly creating a vicious cycle, in which low saving boosts dependence on means-tested benefits, which in turn boosts low savings.
	That cycle must be broken. The way to break it is evident: a lifetime savings account—a flexible way to reward saving—and a pension linked to earnings. That would float 1 million pensioners off means testing in just one Parliament and would allow them to save on top. However, I doubt that the Financial Secretary to the Treasury will announce either proposal tonight. The Opposition certainly would not expect that from a Government whose raid on pension funds has cost a scandalous £5 billion a year.
	Slowly but surely—perhaps unwittingly—the Government are destroying our savings culture, which is why I urge the House to vote for our motion.

Ruth Kelly: We have heard some excellent contributions to the debate, particularly from my hon. Friend the Member for Glasgow, Cathcart (Mr. Harris) and my hon. and learned Friend the Member for Redcar (Vera Baird). I shall respond to some of the detailed points that the Opposition have raised in a few moments; but, first, I should like to put the debate into some sort of context.
	The important achievements of this Labour Government—economic stability, continued economic growth and sound public finances—all provide the best possible environment for savings and ensuring that existing levels of household debt are sustainable. Opposition Members have lectured us on the economy—that from a party that, when in government, had inflation running at 10 per cent., interest rates at 15 per cent., and 3 million people unemployed twice. It ran up a huge deficit. Some 1.5 million people were in negative equity, and there were 250,000 home repossessions. The Conservatives had to break every promise that they made on tax.
	Britain has grown in every year of this Labour Government, while under the Conservatives this country had two of the worst recessions in its history. Higher savings in the early 1990s, which Opposition Members are so fond of quoting at us, were a symptom of macro-economic instability. Households had to save more to make up for the loss of the value of their savings owing to inflation and to provide a cushion in the event of becoming unemployed.
	I cannot resist drawing attention to some of the analysis carried out by the Bank of England, as Opposition Members are so fond of quoting the Governor of the Bank of England, and indeed pointing to the savings ratio performance under this Government. Of course, I treat all these statistics with a measure of caution, as hon. Members will appreciate, but I refer them to an analysis of the savings ratio carried out by the Bank of England, which concluded that, when inflation is taken into account, the savings ratio since 1998 is significantly higher than the average over the previous 40 years.
	If hon. Members look at the facts, they will see that, under this Government, inflation has averaged just 2.4   per cent. compared with 6 per cent. under the Tories—the peak was 21 per cent. Interest rates have been averaging 5.2 per cent., whereas they were on average 10.5 per cent. under the Tories. Mortgage rates have averaged just over 6 per cent. under Labour, while they averaged 11 per cent. under the Tories.
	Conservative Members opposed each of the decisions that we took to put the economy on a sound and stable footing. The decisions that they would have made had they been in government would have put Britain into recession, instead of which Britain is growing. Indeed, when we introduced tough fiscal rules, the Conservative party opposed them. When we introduced the symmetrical inflation target, the Conservative party opposed it. When we made the Bank of England independent, that was opposed by the right hon. Member for West Dorset (Mr. Letwin).

Oliver Letwin: I am sorry to intervene on the hon. Lady, and I am grateful to her for giving way. Is she really trying to tell the House that she thinks that the current level of savings is satisfactorily high?

Ruth Kelly: I would not claim that for one moment. My right hon. Friend the Chief Secretary to the Treasury has pointed to the fact that 3 million people seriously under-save and that 5 million to 10 million do not save enough, but I point to the Conservative party's flawed analysis, flawed facts and inability to grasp the reality. Instead of standing up to apologise, as the right hon. Gentleman should have done, he has proposed a policy that the hon. Member for Havant (Mr. Willetts) described a few years earlier as wild, uncosted and opportunistic. I have not got much time tonight. I would love to take hon. Members through each of the right hon. Gentleman's arguments, but let me look at just some of them.
	First, let us turn to the housing market. The right hon. Gentleman will know that both the Treasury and the Bank of England have consistently forecast a slow-down in consumer spending and house-price inflation as the UK and global economic recoveries gather pace, and because UK interest rates have risen from last year's historic low levels. The recent speech made by the Governor of the Bank of England in Glasgow pointed out the surveys that show early signs of a slow-down in the housing market. The right hon. Gentleman cannot obscure that fact by citing annualised rates; surely he can see the evidence. As he knows, there are important reasons to believe that household overall balance sheets will remain consistent with macroeconomic stability.
	As Mervyn King said in his speech, there are good reasons to think that the long-term level of house prices relative to earnings has risen. For a start, as the Barker review shows, house prices reflect the balance between the rising demand for, and restricted supply of, housing in the UK. Additionally, the success of the new economic policy framework in delivering economic stability with low interest rates and strong labour market outcomes has made people more confident about taking on new risks, which is likely to have contributed to a rise in the equilibrium of the house price to earnings ratio.
	Quite unlike during the late 1980s, the low interest rates delivered by greater macroeconomic stability have ensured that household interest payments remain low by historical standards. The ratio of interest payments to household disposable income has remained close to 7 per cent. since 2002, compared with its peak of more than 15 per cent. in 1990, when consumers were hit simultaneously by rises in interest rates that were well into double figures and rapidly rising unemployment. The result of that is that the asset side of the household balance sheet is strong, with household net wealth, despite the recent fall in equity prices, still more than 50 per cent. higher than at the beginning of 1997. The right hon. Gentleman will doubtless appreciate that when developments on both sides of the household balance sheet are taken together, the ratio of household debt to total wealth remains stable around its long-term average.
	Instead of looking at the facts, the right hon. Gentleman tried to make a rather tortuous argument about the impact of mortgage equity release on interest rates, arguing somehow that that is fuelling an increase in consumption that will thus hit interest rates. Given that he is so keen on the Bank of England, I shall cite an analysis in a recent inflation report that examined mortgage equity release and argued that that was largely driven by demographic factors and unlikely, therefore, to have had a significant impact on consumption.
	I could back up that analysis with figures from the Office for National Statistics, which suggests that most of the mortgage equity release that has been withdrawn over the past few years has been saved, not spent. Three quarters of the increase in mortgage debt since early 2000 has been matched by a build-up of money and deposits, while the savings ratio has remained broadly stable. I urge the right hon. Gentleman to undertake more cautious analysis in the future before making great claims about the effect of mortgage equity release on consumption. I agree that there are real issues to address regarding the impact of debt.

Oliver Letwin: Before the hon. Lady continues, will sheadmit to the House that the Treasury has no accurate figures at all on the use of mortgage equity withdrawal?

Ruth Kelly: I have cited two sources for our estimates on mortgage equity withdrawal: the Office for National Statistics, which most people would say was at the cutting edge of international statistics; and the Bank of England, which the right hon. Gentleman has cited throughout the debate.
	Hon. Members on both sides of the House would agree that we must take the impact of debt on vulnerable consumers extremely seriously. We want to have well-informed consumers who are able to take sensible and appropriate decisions about their long-term finances. I remind the right hon. Gentleman that from 31 October 2004, we will regulate mortgages for the first time. The Financial Services Authority will require a key facts illustration on all mortgage agreements, which will make clear to consumers the effect that a 1 per cent. rise in rates would have on repayments. We are also considering the proposals suggested by Professor Miles in his review.
	The Government's vision is of a simpler, more transparent market in long-term savings in which trusted and trustworthy providers sell simple, good-value products to informed consumers. We have been working towards that for the past six years with measures—

Peter Luff: rose in his place and claimed to move, That the Question be now put.
	Question, That the Question be now put, put and agreed to.

Question put accordingly, That the original words stand part of the Question:—
	The House divided: Ayes 165, Noes 269.

Question accordingly negatived.
	Question, That the proposed words be there added, put forthwith, pursuant to Standing Order No. 31 (Questions on amendments):—
	The House divided: Ayes 264, Noes 162.

Question accordingly agreed to.
	Mr. Deputy Speaker forthwith declared the main Question, as amended, to be agreed to.
	Resolved,
	That this House believes that a strong and stable economy is the foundation of families' confidence in their own finances; notes that economic stability has delivered low and stable inflation, interest rates have been at their lowest since the 1950s, employment is at a record high and unemployment at its lowest since the 1970s; further notes that as a result households are better able to judge their long-term commitments as macroeconomic stability has reduced the risks to household finances of sudden and sharp rises in interest rates as seen in the past; believes that the Government has tackled the scandals it inherited and created a world leading system of financial regulation allowing people to save with confidence, simplified savings markets allowing people to make informed choices about what and how to save and taken action to tackle financial exclusion; recognises that most household debt remains affordable and that total interest payments are now 7.6 per cent. of disposal income compared with 15 per cent. in 1990; believes the biggest risk to household finances and consumer confidence would be a return to economic instability; and rejects the short-term boom and bust economic policies of the past that saw interest rates hit 15 per cent. and inflation hit 10 per cent. in which circumstances households had to save more to make up for the loss of value of their savings due to inflation and prepare in the event of becoming unemployed.

DELEGATED LEGISLATION

Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

Landlord and Tenant

That the draft Rights of Re-entry and Forfeiture (Prescribed Sum and Period) (England) Regulations 2004, which were laid before this House on 7th June, be approved.—[Mr. Ainger.]
	Question agreed to.
	Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

Civil Aviation

That the draft Stansted Airport Aircraft Movement Limit (Revocation) Order 2004, which was laid before this House on 8th June, be approved.—[Mr. Ainger.]

Mr. Deputy Speaker: I think the Ayes have it.

Hon. Members: No.
	Division deferred till Wednesday 7 July, pursuant to Orders [28 June 2001 and 6 November 2003 (Deferred divisions)].

Mark Prisk: On a point of order, Mr. Deputy Speaker. Can you confirm that the motion that was opposed will now be dealt with in a deferred Division? Should it be clearly put on the record that that has occurred only due to vigorous opposition by Conservative Members, while not a single word was heard from the Liberal Democrats?

Mr. Deputy Speaker: The hon. Gentleman knows that that is not a point of order for the Chair, but a means of trying to continue the debate.

Oliver Heald: Further to that point of order, Mr. Deputy Speaker. Is it not the tradition in this place that if a matter is of great importance to a party, its spokesman should attend to deal with it? The Conservative spokesman on aviation is here, but there is no Liberal Democrat; is not that unusual?

Mr. Deputy Speaker: I think that the ruling that I gave to the hon. Member for Hertford and Stortford (Mr. Prisk) also applies to the hon. Member for North-East Hertfordshire (Mr. Heald).

DELEGATED LEGISLATION

Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

Criminal Law

That the draft Discharge of Fines by Unpaid Work (Prescribed Hourly Sum) Regulations 2004, which were laid before this House on 10th June, be approved.—[Mr. Ainger.]
	Question agreed to.

EUROPEAN COMMUNITY DOCUMENTS

Motion made, and Question put forthwith, pursuant to Standing Order No. 119(9) (European Standing Committees),

Preliminary Draft Budget 2005

That this House takes note of the unnumbered Explanatory Memorandum from HM Treasury dated 11th May 2004 relating to the Preliminary Draft General Budget of the European Communities for the financial year 2005; and supports the Government's efforts to maintain budget discipline in the Community.—[Mr. Ainger.]
	Question agreed to.

PETITIONS
	 — 
	Finney Green Post Office

George Osborne: I wish to present a petition on behalf of Mrs. Barbara Watson and more than 800 residents of Wilmslow and the surrounding area.
	The petition states:
	The Petitioners declare
	That they oppose plans made by Tesco to close the Finney Green post office in the Somerfields shopping centre at Dean row and that they are leading a campaign to keep the post office open.
	The Petitioners therefore request that the House of Commons urge the Government to support the campaign to keep Finney Green post office open by doing all in its power to bring about a review of Tesco's proposals.
	And the Petitioners remain, etc.
	To lie upon the Table.

Romford Post Offices

Andrew Rosindell: I rise on behalf of many constituents in Romford, especially members of the Roman Catholic parish of the church of St. Edward the Confessor, who are appalled by the recent closure, without notice, of the main post office in Romford town centre. Thousands of local people, especially elderly people who depend on the facilities, used the post office. They were shocked when, at the end of March, it suddenly closed without warning. The people of Romford are deeply concerned that, months later, there is no sign of a new post office.
	They are also deeply worried about the potential simultaneous loss of many local sub-post offices. Both issues are the subject of many petitions that have been presented to me. I, in turn, intend to present them to the House. The first is the petition of St. Edward's Catholic church and it contains 145 signatures.
	The petition states:
	To the House of Commons,
	The Petition of the congregation of St. Edward's Roman Catholic Church
	Declares that Romford's post offices are under threat of closure and that Romford's main post office has already been closed.
	The Petitioners therefore request that the House of Commons do all in its power to keep as many of the local post offices open in Romford as possible and to urge Post Office Ltd. to reopen Romford's main post office without delay.
	And the Petitioners remain, etc.
	To lie upon the Table.

DEVELOPMENT SCIENCES RESEARCH COUNCIL

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Ainger.]

Tony McWalter: The subject of the debate is the need for a development sciences research council. I shall speak rather quickly because I have a lot to get in.
	I begin with a problem, which is somewhat indelicate to state. Human beings have a propensity to defecate in places that are clean and do not bear the signs and smells of others of their species. There are also advantages to performing that bodily function near a running stream. So far, so natural. A tribe of a few hundred souls, camped by a fast-flowing river, might suffer no great disadvantages from what one could describe as natural toilet arrangements. If their neighbours down-river are not too near, or if the river flows fast enough, they might suffer no ill effects. However, if the population increases and inordinate pressure is put on a community's natural infrastructure, there will come a time when the natural arrangements have terrible consequences.
	For example, the tribe might need to access ground water. Water gets polluted and water tables can become not a source of life, but agents for blindness and early death. A society caught in transition, clinging to the old ways but under pressure from "progressives" to change, clinging to a set of customs and cleaning rituals that seem no longer effective, might find it difficult indeed to adjust its culture and ways to take account of new knowledge. That applies especially when the new knowledge is scientific in character and describes invisible organisms that have the propensity to threaten life itself.
	When those who propound the new knowledge enjoin all the members of the tribe to defecate in the same place, when they then say that the products of the toilet must be collected together and either dried to make biofuel or treated to be spread on fields, and when they are asked to drink only water collected by evaporation on funnel-shaped plastic sheeting, strong cultural resistance is hardly surprising, yet that is the programme that Professor Silas Lwukumba at the Kigali institute of science and technology advocates. I should like much of his work at the institute to receive proper support.
	There have been solutions to those problems. Sometimes, tribesmen of the kind that I have described have been commanded or compelled to adopt the ways of their conquerors, but we now live in times in which the abolition of a community's modus vivendi is rightly seen as neither the right nor the prerogative of those with a more scientifically advanced culture. Most of those involved in development issues have given up what might be called the push model. Unfortunately, the pendulum might have swung too far in favour of a pull culture, in which only a tribe that asks for something gets anything at all. In that new, liberal way of dealing with problems, many development workers now claim to work only on problems that the tribe itself specifies as a problem. That cannot be right either. Those who are familiar with western science are often good at knowing the vast variety of resources available to solve problems in the developing world. We acknowledge, of course, that many of those problems are themselves products of inappropriately applied western technology.
	Scientists should not always wait for those in developing countries to specify their problems or to say which of their needs they want to be addressed. Sometimes, western scientists know that there is a problem even when, as with sanitation, the problem consists of certain invisible organisms. I shall give an example of this. I recently returned from Malawi, one of the poorest countries in the world. In one area, there is a major problem with ground water, with the chromium level at 16 times the World Health Organisation recommended level, and fluorine at eight times that level. That is a potential problem, in terms of water purification, and a potential opportunity.
	For all I know—I am pursuing the matter—a mining engineer might feel that the levels that I have mentioned might be worth an assay. If it turned out that there were local rocks with high levels of chromium, there might lurk in that water impurity a resource that could help that community to move from extreme poverty and starvation towards having an industry and a worthwhile source of income. People who ask those who know no science to decide how their problems should be solved might condemn them never to escape the sentence of extreme poverty and an early death.
	We need neither a push model, in which solutions are imposed on people who might not be ready for them, nor a pull model, in which western societies and engineers might decide not to vouchsafe an analysis or a solution until it is asked for. We need a push and pull model—a co-operative model—in which both the community and a helping agency are given a sense of ownership both of the problem and of its solution. Those who recognise that a culture has ways that are conducive to its own immiseration or destruction should work with such groups to evolve new cultural forms that respect the old culture but moderate it so that changes can be introduced that work with the grain of that culture but are more protective of the health and life chances of the members of the tribe.
	I am arguing that, in a development context, we need what we might call a push and pull model for intervention. Such a model would bring together experts from very different disciplines to work to push appropriate technologies on to communities at a pace and in a style that identified and worked with the belief systems of the beneficiaries of such new arrangements. In the case that I have mentioned in Rwanda, for example, a push and pull model for development would bring together engineering, philosophy, anthropology, language study and chemistry, among many other disciplines.
	How well equipped is the UK to help with push and pull development models? I submit that our own capacity in this regard is weakening, and I shall make some suggestions here about how it might be strengthened. I submit that, in strengthening our own system, we would also be protecting and enhancing our own capacity to retain a healthy economy, although that is not my central concern in this debate. Why is the UK not well positioned to translate our scientific expertise into programmes that will assist the development of poor countries? I have time here to address only two of many weaknesses. First, science in the UK has a bad image. Secondly, our structures are ill equipped to translate whatever scientific expertise we do have into projects that will benefit developing countries. My treatment of the bad image will lead to recommendations on our structures.
	On that bad image, when the public hear "chemical" as a noun, they are more likely to associate it with "toxic" than with anything positive. Science has a poor profile with many citizens, and if people in the UK see in an article about pollution a picture of a man in a white coat standing beside a river, they are more likely to think of him as a cause of the problem than the person who has the power to solve it.
	One key question that we need to address is to what extent scientists address the question of that bad image. In my view, they address it not well at all, yet if one visits a poor country one is struck forcefully by one key difference between such a country and ours: in our country, one is surrounded everywhere by science and the technology derived from it.
	In the poor country, 80 per cent. of the population work on the land, but even with that huge effort they are barely able to feed themselves. A store half-full of maize in November will result in death by famine in February. I have seen such stores. Meanwhile, in our country only 3 per cent. of the population need work on the land. With chemical inputs, agricultural knowledge and high-tech machines, they produce enough to feed the rest of us. That leaves the remaining 97 per cent. of the work force to produce a huge range of goods and services for the betterment of quality of life for the population not just of this country, but of countries far beyond its borders.
	It seems absurd on the face of it that science and technology should be held in low regard by the hundreds of millions of people who gain so much from them, but in many western countries they are rated so low as to be constantly vilified. Part of the negative picture of science is derived from what it has done to threaten the quality of life rather than improve it. Whether it is the nuclear bomb or the gases in the chambers of the holocaust, most people can think of an example of scientific knowledge turned to terrible, evil account. Whether it is a dam that floods a valley and destroys the livelihood of thousands, pesticides on fruit, experiments on animals or the premature release of genetically modified crops to the environment, most people can cite an example of a scientific technology that discomforts or alarms them.
	Those examples stack up to a negative image. The result is that a large majority of young people switch off science—they have no ambition to do it—to the point that our capacity to develop new scientific ideas and technologies is eroded.
	My suggestion for what might switch young people back on to science is as follows. Young people are often idealistic and, if they can, they want to help in particular those in the world who face premature death or avoidable painful diseases. Most young people do not consider science as having a positive connection with those goals, yet manifestly it has.
	A high capacity to do science or engineering in the UK not only brings the potential security of our being able to make and pay our way in the world in a century that will undoubtedly be characterised by new discoveries, but ensures that we have the capacity to help other countries, including some of the poorest in the world, to build their capacity to address the terrible problems that so many of them face.
	One suggestion that I have is, in essence, simple: teach youngsters science and technology in the context of how the ideas, techniques, mechanisms and material studies can help radically to improve the quality of life in the poorest parts of the world. We should be making in education explicit connections between science, technology and development, but it is hard to make those connections at present. One major obstacle is the structure of our research councils. I want to suggest how that structure should be changed.
	I shall focus the rest of this speech on engineering, because that is an area where, increasingly, our capacity in the UK is being compromised and because engineers have done very little to make any explicit connection between their subject and development issues. Engineering has a research council—the Engineering and Physical Sciences Research Council—but does it take much interest in development issues? No. Could it take much interest in such issues? Only with difficulty. After all, the job of the research councils is to push back the frontiers of knowledge, and in that cause they allocate grants for research on problems that are at the cutting edge.
	An academic in an engineering faculty in a university will develop an interest in development issues at his peril, for the current wisdom is that those who do engineering in developing countries are not so much pushing back the frontiers of knowledge as applying what is known already in a new situation. Applied research is regarded as of lower grade in the university's research assessment exercise—RAE—on the understandable grounds that while many people can apply a known technology to a new situation, it is a rarer gift to be able to develop a new technology in its entirety. The research council, the EPSRC, funds the latter type of projects and not the former.
	The matter does not end there. If a university department gets a low RAE score, it gets less money, and its continued activity, even its continued existence, is threatened. Its existence is especially threatened when in addition to a low RAE score, it finds it difficult to attract students, and engineering courses generally do so, not least because, in addition to engineering's image, which I mentioned, it is perceived as needing high mathematical skills, and students notoriously avoid such subjects. Engineering is expensive, because it needs equipment that costs a good deal of money, and often needs considerable space to be housed. If an engineering department did dedicate itself to working on the problems of developing countries, it would also need to conduct its operations both in the UK and in those countries. Once again, those operations would be expensive to the point that it would be difficult to generate the resources to ensure continuing funding.
	I can summarise those factors as follows. A university engineering department—I speak with some passion, as my university's civil engineering department has just closed—which decided it wanted to use its expertise especially to address the problems in developing countries would be financially unviable. It would fail to attract EPSRC money, a high RAE score, a sufficient number of students, the space needed for its operations, or the necessary funding for travel. In short, such a decision would be suicidal. The wonder is that a few departments still try valiantly to do their best.
	The result of these considerations is that engineering departments in universities are rational if they fight shy of being seen as a resource for capacity-building in developing countries. The effect of that, basically, is to connect them to rich countries, which in turn consolidates the perception of engineering as unresponsive to the greatest of human needs—those of the poorest in our globe.
	Of course, the engineering profession lacks a voice that might proclaim that the subject does contain idealists who want to use their skills to make the world a better place for the poorest as well as the richest of their fellow human beings. To start with, engineers divide themselves into myriad respective constituencies, so that civil engineers do not talk in the same breath as electronic engineers. The body that one might expect would speak for all engineers, the Royal Academy of Engineering, seems to be dumb on most of these issues. Recently, it has even declined to give evidence to the Science and Technology Committee about development issues on the basis that it "lacks the expertise".
	The Royal Academy of Engineering was not always dumb. Its chairman, Alec Broers, said to me today:
	"Throughout the 1990s, on behalf of the British Government, we ran the UK secretariat for the UN's International Decade for Natural Disaster Reduction"—
	supported by the Royal Society—
	"which ceased at the end of the decade once the funding from DFID had dried up. In its prime this was a very substantial activity."
	DFID has much to answer for. There have been major vacillations in DFID about whether it wanted an infrastructure programme, and it has recently incorporated its engineering division into a policy area that now does not explicitly mention engineering at all. That is not surprising, as, increasingly, its main functions seem to be economic rather than technological.
	Why should all this matter? What has been done? And what can be done? It matters because it is a matter of life and death. Only if money is translated into scientific and engineering skills in a push-and-pull model will the welcome, improved financial commitments made by this Government serve to improve life chances. Real material changes in infrastructure benefit the poor—let us consider my Rwandan example—and those changes are not easily translated into a Swiss bank account.
	What has been done? It would appear that if anything there has been retrogression rather than progression, despite DIFD's increasing budgets. That is because it lacks a scientific culture. It cannot even decide to have a chief scientist. Its policy echoes that of Churchill, who wanted his scientists on tap but not on top. I want them nearer the top than DIFD's economists would like.
	What we must do is ensure that if we can put development sciences on the same level as other studies to try and avoid the problems that come from having research councils that are specialised rather than at least one being explicitly interdepartmental—and there is no more interdepartmental subject than the future of the globe itself—we can give our system an incentive to put people into this area of work. That would mean that excellent work in development sciences of any sort would receive the five-star rating that is so essential to continuing departmental funding in our universities. It would also rescue development studies from the clutches of departments of economics. I am not saying that economists do not do valuable work, but the emphasis in DIFD should shift. Scientists should not be constantly consigned to membership rather than leadership of a team.
	If my Rwandan sanitation problems were taken seriously, that would bring together experts from every one of the existing research councils—except, perhaps, the particle physics one. What if a team were able to solve such a problem in a way that was eventually adopted so that it became standard, widespread practice in Rwanda? Does anyone seriously think that it would not be a first-rate problem, whose solution would require great intelligence and ingenuity of just the sort that distinguishes the most exceptional achievements in other sciences?
	I do not argue for a development sciences research council as a sop, so that those who work in the area might be compared with those who work in particle physics. I make my case because the problems are just as demanding as the problems of particle physics, and those who apply themselves to such problems should achieve appropriate recognition. Co-ordination of knowledge from a number of different areas in the interests and service of mankind is itself a first-rate intellectual challenge.
	Those who say in derogatory fashion that in development work we apply known knowledge to a new area are quite wrong. Whenever we bring a body of knowledge to bear on new problems, we are likely to find that the knowledge with which we started is radically deficient, and needs amendment and rethinking. That is just what the best research so often produces. The award of moneys for such a purpose by a development sciences research council would be a powerfully effective use of resources; and, at last, the full range of ethical concerns of scientists and engineers would be manifest.

Stephen Timms: I congratulate my hon. Friend the Member for Hemel Hempstead (Mr. McWalter) on securing the debate. I listened with interest to his example about the provision of toilets in the developing world. Let me begin by drawing his attention to the work of Phoenix Developments, a company based at the University of East London's docklands campus in my constituency. It is dedicated to the development of a low-water-consumption toilet, specifically because the engineer who leads the company wants to contribute to well-being in the developing world and to achieving the millennium development goals, with the same passion that my hon. Friend showed in his advocacy of the engineering profession.
	My hon. Friend made an effective case for the creation of a development sciences research council. I know there is a lively debate about the subject between different members of the Science and Technology Committee, and I look forward to seeing its conclusions in due course.
	Let me begin by referring to a couple of speeches made recently by my right hon. Friend the Secretary of State for International Development—who I am delighted to see is present—reflecting the importance that he attaches to the subject. I was present last week when my right hon. Friend spoke at the annual dinner of the Institution of Civil Engineers. My hon. Friend the Member for Hemel Hempstead said that engineers have done very little to make an explicit connection between their subject and development issues. However, my right hon. Friend made a very clear connection in his speech between international development and engineering. Indeed, his speech was very well received by the ICE, and I certainly came away from that event with the strong impression that, in fact, there is a very deep commitment on the part of engineers that their skills be used in addressing the problems of poverty in the developing world. We took a collection at that event for a charity called "Engineers Against Poverty", which, if I understood correctly what was said that evening, my right hon. Friend's Department supports. That reflects the aspiration that my hon. Friend has been calling for.
	My right hon. Friend the Secretary of State also spoke recently to the Foundation for Science and Technology. He echoed my hon. Friend's view that science and technology can indeed be critical to achieving long-term and sustainable development, and I know that he is looking forward to giving evidence this week to the Science and Technology Committee. I, too, would like to acknowledge the importance of the Committee's current work in looking into science and technology's role in international development policy.
	In his speech, my right hon. Friend pointed out that his Department has a very clear mission—to help reduce world poverty—and that everything that his Department does has to be judged against that yardstick. He pointed to examples of science playing an extremely important role when he spoke about:
	"Every day, 16,000 people contract HIV/AIDS, and a further 8,000 will die from it. Women are increasingly the most affected, and . . . science can help. The UK is a world leader in microbicides. Imperial College and the Medical Research Council are developing vaginal microbicides in the form of a cream, or gel, that reduce the chance of HIV/AIDS infection. DFID is putting £17 million into large-scale effectiveness trials of possible microbicides. With only moderate uptake, they could prevent 2.5 million deaths every three years".
	In a changing world—climate change, conflict, population growth, killer diseases and the challenge of pulling Africa out of poverty—science and technology need to produce solutions for developing countries. Malaria kills 3,000 people a day. We do not yet have adequate, high yielding drought-resistant crops appropriate for the diverse and rapidly changing eco-systems of Africa. So it is right that increased attention be paid, not just in the UK but internationally, to how science and technology can contribute to international development.
	Kofi Annan has commissioned 10 taskforces to review progress on the millennium development goals, one of which is concerned with science and innovation. The inter-academy council of sciences has just undertaken a study to develop a strategy for building worldwide capacities in science and technology. The New Partnership for Africa's Development, an African-led initiative, will discuss the role of science from an African perspective. Sir David King, the Government's chief scientific adviser, made a presentation today at the Africa Commission's London School of Economics brainstorming event on capacity-building in science and technology. So this is a truly international effort, and the UK is very strongly represented.
	Is a UK development sciences research council the best way to equip the UK in helping developing countries to evolve the new technology that will prove of lasting value? DFID is certainly looking into ways of developing a more coherent approach to the funding of development research. That is particularly important in the context of the two White Papers on international development that have been published since 1997, both of which highlight the importance of science and technology. On the one hand, a dedicated council would give development research a high profile and increase opportunities for a multidisciplinary approach. On the other, such a council might discourage existing research councils from working on development, as the Medical Research Council and the Engineering and Physical Sciences Research Council extensively do, for example.
	It is not always easy to separate development issues, and it is better to consider the relevance to development of all research. My hon. Friend's suggestion is a valuable idea and one that will repay careful reflection on the part of the Government. I assure my hon. Friend that it will receive that.
	I wish to respond to some of the specific points that my hon. Friend made about the research assessment exercise, and I note his concerns. He may know that the most recent UK research assessment exercise was carried out by the four UK higher education funding bodies and was completed in 2001. The purpose of the exercise was to provide authoritative and comprehensive quality ratings for research in all disciplines. The funding bodies recognised—as my hon. Friend pointed out—that the research assessment exercise does not deal well with interdisciplinary research. In preparing for the next exercise, the funding bodies have been consulting and exploring ways to improve performance.
	It was announced in February 2004 that the next exercise, planned for 2008, will use quality profiles to provide a fuller and fairer assessment of research carried out in universities and colleges in the UK. The funding bodies believe that that new approach, which has been fully supported in the consultation, will provide a fairer and more accurate way of assessing and funding research quality.
	To respond to my hon. Friend's point about education, my right hon. Friend's Department recognises that raising awareness of development issues among people in the UK is extremely important. My right hon. Friend is especially keen to reach out to young people. His Department allocates £6.5 million a year to development awareness, and part of that money has financed the production of a book for key stage 3 and 4 pupils. It has been very popular. DFID also funds a booklet on developing a global dimension in the English school curriculum, which is also very popular. It is published jointly with others and sent to every teacher in every subject at every stage in the school education system. His Department is about to publish a similar booklet for Scotland and is in discussion with the Welsh Assembly.
	My right hon. Friend's Department, together with the Office of Science and Technology, is currently consulting on support for the Kigali research institute, which my hon. Friend mentioned. The Department has recently introduced a post of head of profession—
	The motion having been made after Ten o'clock, and the debate having continued for half an hour, Mr. Deputy Speaker adjourned the House without Question put, pursuant to the Standing Order.
	Adjourned at two minutes past Eleven o'clock.